Multiple choice

Annual Fire Insurance (of Building) Rs. 12, 000, paid on 1st January 2006 during accounting year ending on 31.3.2006 is

  1. capital expenditure

  2. revenue expenditure for current year Rs. 3,000, prepaid revenue exp. for next year Rs. 9, 000.

  3. deferred revenue expenditure

  4. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 Annual expenditure= 12,000Monthly= 1,000Year ending= 31st march 2006, Amount paid on january 1, 2006Therefore, the amount paid for the current year is 3,000( Jan + Feb+ March)and rest of the amount is prepaid, which is (12,000 - 3000) = Rs. 9,000

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