Terms Introduced in the Chapter

Expenses that relate to the current accounting year but remain unpaid at its close. They are added to the respective expense in the trading or profit and loss account and shown as a …

The part of an expense paid during the year whose benefit will be received in the next accounting year. It is deducted from the respective expense and shown as a …

Income that has been earned during the accounting year but not yet received. It is added to the respective income in the profit and loss account and shown as a …

Income received during the year that relates to the next accounting period (unearned income). It is deducted from the respective income and shown as a lia …

The fall in the value of a fixed asset due to wear and tear, use, or the passage of time. It is charged to the debit of the profit and loss account and deducted from t …

Debts that have become irrecoverable and are written off as a loss. Further bad debts given as an adjustment are deducted from debtors before …

An amount set aside out of profit to cover debts that may become irrecoverable in future. It is calculated as a percentage of debtors (after writing off further bad debts) and shown as a deduction …

An estimated amount set aside for the cash discount likely to be allowed to debtors who pay promptly. It is calculated on debtors remaining after further bad debts and th …

Commission payable to a manager, usually a percentage of net profit. It may be a percentage of profit before charging such commission, or after charging it (in which case Commission = rate/(100 + …

Interest allowed on the proprietor's capital as compensation for the funds invested. It is charged to the debit of the profit and loss account as an expense and added to …