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After attempting this GDB, students will be able to understand:
Suppose you appear in an interview for the position of assistant to manager finance in a XYZ company. The interview panel expects you to answer some of the basic questions. First the panel gives you a scenario to differentiate between the expense and expenditure with logical explanation. And the scenario is that:
Assume that a company purchases equipment of worth Rs. 755,500. Expecting that the equipment will have a useful life of ten years, the cost of equipment under the straight line method of depreciation will be reported as Rs.207 per day for next 3,650 days.
Another question from the panel is that you need to discuss that why the following items are considered accruals?
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FIN621 solution may 2016
An expense is a cost that has expired, was used up, or was necessary in order to earn the revenues during the time period indicated in the heading of the income statement
The expenditure may be for the purchase of an asset, a reduction of a liability, a distribution to the owners, or it could be an expense.
Expenditure are required to increase asset while expanses are used to maintain the assets.
So in the light of it, in this given scenario, the equipment worth is expenditure & the depreciation cost will be treated as expense.
Part 2 Solution:
As we know the accrued expenses are those expense which become liability but not yet paid. On the other hand, the accrued revenue are those which become our income but not yet received.
So in the light of it, the given four items are considered accruals.
Thank You sir ...
+ M.Tariq Malik Sir plzzz post FIN 623 GDB as well ...THanks