VCE Accounting balance day adjustments

On balance day each revenue and expense is brought to the amount earned or incurred in the period, whatever cash has moved. The study design names four adjustments, each with its own approach and its own GST timing.

Prepaid expenses	Asset approach; GST recorded at payment
Accrued expenses	GST recorded at payment
Unearned revenue	Liability approach; no GST at the deposit
Accrued revenue	GST recorded at receipt

The four adjustments

Prepaid expense: the payment was recorded as an asset, and on balance day the part used up moves to the expense.
Accrued expense: an expense incurred but not yet paid is recorded with a liability; the later payment clears it.
Unearned revenue: a deposit was recorded as a liability, and on balance day the part now earned moves to revenue.
Accrued revenue: revenue earned but not yet received is recorded with an asset; the later receipt clears it.

Why the adjustments matter

Without them, profit would follow the cash rather than the period. Each adjustment changes the Income Statement and the Balance Sheet, never the Cash Flow Statement, which is why cash and profit differ.

Try 2 questions

Question 1 · Short question · Balance day adjustments2 marks

Balance day adjustments

On 26 June 2026 Mallee Music received a deposit of $1,200 from a customer for goods to be delivered in August 2026, and recorded it in Unearned Revenue. The balance date is 30 June.

How is Unearned Revenue reported at 30 June 2026? (2 marks)

As revenue in the Income Statement for the year ended 30 June 2026As a current liability in the Balance SheetAs a current asset in the Balance SheetAs part of owner's equity

Question 2 · Short question · Depreciation2 marks

Non-current assets and depreciation

Saltbush Skincare bought a vehicle on 1 July 2023 for $50,000 (excluding GST). It is depreciated at 20% a year by the reducing balance method, and depreciation was recorded at each balance date, 30 June 2024 and 30 June 2025. The vehicle was sold on 30 September 2025.

Record the General Journal entry for depreciation on the vehicle up to the date of sale. Narration is not required. (2 marks)

Account name	Debit $	Credit $

Leave any spare lines blank.

Next step

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The VCAA's VCE Accounting study design page

Questions people ask

Is GST recorded on a balance day adjustment?

No. On a prepaid or accrued expense, GST is recorded at the payment; on accrued revenue, at the receipt. A deposit for unearned revenue has no GST recorded at the time of the deposit.

Which approach does VCE use for prepaid expenses?

The asset approach: the payment is first recorded as an asset.

Does a balance day adjustment change the Cash Flow Statement?

No. It changes the Income Statement and the Balance Sheet; cash only moves when the payment or receipt happens.