Is Goodwill real or fictitious?
Is Goodwill real or fictitious?
(i) Goodwill is an intangible asset and not a fictitious asset.
Is bills receivable a fictitious asset?
Answer: Fictitious assets are not assets at all however they are shown as assets in the financial statements only for the time being. In fact, they are expenses and losses which for some reason couldn’t be written off during the accounting period of their incidence. Prepaid rent is not a fictitious asset.
What is the treatment of fictitious assets?
Fictitious assets have no physical existence or you can say these are intangible assets. These type of assets are just expenses which are treated as assets. They have no realizable value. They are amortized or written off in one then more profitable financial year.
How will you verify the fictitious asset?
Fictitious Asset
- Auditor should verify that expenses incurred are properly authorised by a responsible person.
- He should ensure that fictitious assets are treated as deferred revenue expenditure.
- The auditor should confirm that the asset is disclosed in the Balance Sheet at the amount of expenditure incurred less amount written off.
Is Prepaid expenses a fictitious asset?
Fictitious assets are written off against the firm’s earnings more than one accounting period. Basically, they are amortized over a period of time. They are recorded as assets in financial statements only to be written off later. Prepaid rent is not a fictitious asset.
How are Prepaid expenses recorded?
When a company prepays for an expense, it is recognized as a prepaid asset on the balance sheet, with a simultaneous entry being recorded that reduces the company’s cash (or payment account) by the same amount.
Is prepaid expense a debit or credit?
The initial journal entry for prepaid rent is a debit to prepaid rent and a credit to cash. These are both asset accounts and do not increase or decrease a company’s balance sheet. Recall that prepaid expenses are considered an asset because they provide future economic benefits to the company.
What is prepaid salary?
Examples-prepaid salary, prepaid rent, etc. Prepaid expenses are recorded in the books at the end of an accounting period to show true numbers of a business. Prepaid (Unexpired) salary is a personal account and is shown on the assets side of balance sheet.
Is prepaid insurance increase by a debit?
You pay upfront and use the insurance throughout the year. When you buy the insurance, debit the Prepaid Expense account to show an increase in assets. And, credit the Cash account to show the loss of cash. Each month, adjust the accounts by the amount of the policy you use.
Is expired insurance a debit or credit?
As the insurance expires over time, companies debit the expense account of expired insurance and credit prepaid insurance to reduce the balance in the asset account.
What is the journal entry for insurance premium?
A basic insurance journal entry is Debit: Insurance Expense, Credit: Bank for payments to an insurance company for business insurance. Not all insurance payments (premiums) are deductible* business expenses. Some insurance payments can go on to the Profit and Loss Report and some must go on the Balance Sheet.
How do you account for insurance premiums?
At the end of any accounting period, the amount of the insurance premiums that remain prepaid should be reported in the current asset account, Prepaid Insurance. The prepaid amount will be reported on the balance sheet after inventory and could part of an item described as prepaid expenses.