WAEC Accounting Past Questions & Answers - Page 102

The provision for doubtful debts is the estimated amount of bad debt that will arise from accounts receivable that have been issued but not yet collected. Provision for bad debts can only appear in the income statement if there is an increase in provision.  Thus, the net impact of the increase in provision for doubtful debts (expenses) is the decrease in the net profit

Prepaid expenses are future expenses that have been paid in advance. In other words, prepaid expenses are costs that have been paid but are not yet used up or have not yet expired.

N400 is the only future expense that would still be viable at the end of the accounting year. The N400 represents current assets which are expected to be used or converted to cash within the year.

The profit and loss (P&L) statement is a financial statement that summarizes the revenues, costs and expenses incurred during a specified period, usually a fiscal quarter or year. 3000 is the only expenses incured within the year. other payments were made in advance.

Gross profit – is the excess of net sales over the cost of goods sold. This invariably means that, the excess of cost of goods sold over net sales is a gross loss. 

The purpose of the balance sheet is to reveal the financial status of a business as of a specific point in time. The statement shows what an entity owns (assets) and how much it owes (liabilities), as well as the amount invested in the business (equity).