Tag: adjustments in preparation of financial statements

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Questions Related to adjustments in preparation of financial statements

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

From the following particulars, calculate the amount of income to be credited to profit and loss account for the year ended $31$st March $2012$.

$31-3-2011$ $31-3-2012$
Outstanding Income $1,500$ $1,200$
Income received in advance $900$ $540$

A sum of Rs. $14,670$ was received as income during the year ended $31$st March $2012$.

  1. $15,930$

  2. $14,010$

  3. $15,330$

  4. $14,730$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Income to be credited = Cash received + Closing Outstanding - Opening Outstanding - Closing Advance + Opening Advance. Calculation: 14670 + 1200 - 1500 - 540 + 900 = 14730.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

Unaccrued Interest is an example of __________.

  1. Increase in asset & decrease in owner's liability

  2. Increase in liability & decrease in owner's liability

  3. Decrease in liability & owner's liability

  4. Increase in asset & owner's liability
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Unaccrued interest (interest received in advance) is a liability. Receiving it increases the company's liability and decreases the owner's equity (or represents a future obligation).

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

Accrued Interest is an example of _________.

  1. Increase in asset & decrease in owner's liability

  2. Increase in liability & decrease in owner's liability

  3. Decrease in liability & owner's liability

  4. Increase in asset & owner's liability
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Accrued interest is interest earned but not yet received, which is an asset. Recognizing it increases assets and increases the owner's equity (via income).

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

Star Tour has a Rs. 5,000 account receivable from Mr. X. On February 5, Mr. X makes a partial payment of Rs. 3,000 to Star Tours. The journal entry made on February 5 by Star Tours to record this transaction includes:

  1. A credit to the cash received account of Rs. 3000

  2. A credit to the Accounts receivable account of Rs 3000

  3. A debit to the Account of Rs. 2000

  4. A debit to the accounts receivable account of Rs 2000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When a customer pays a partial amount on their account, the cash account is debited and the accounts receivable account is credited to reduce the balance owed by the customer.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

On receipt of Rs 975 from Shyam on his account for Rs 1000 Shyam's Account should be credited with ____________.

  1. Rs 1000

  2. Rs 975

  3. Rs 25

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

When a payment is received from a debtor, the debtor's account is credited with the actual amount of cash received, regardless of the total balance owed.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

What will be the treatment of "accrued income" if appearing in the Trial Balance.

  1. It will be shown on the assets side as current assets in the balance sheet

  2. It will be shown on the liabilities side as current liability in the balance sheet

  3. It will be shown on the debit side of trading account as an expense

  4. It will be shown on the credit side of profit and loss account as an income
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accrued Income is treated as an asset for the company , hence it will be shown in Asset Side in the Balance Sheet. 

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

In balance sheet, accrued income is shown under which head of assets _______________.

  1. Intangible Assets

  2. Current Assets

  3. Fictitious Assets

  4. Tangible Assets
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

It may happen that certain items of income such as interest on loan, commission, rent, etc. are earned during the current accounting year but have not been actually received by the end of the same year. Such incomes are known as accrued incomes. The adjusting entry for accrued income is:

Accrued Income A/c Dr.     
      To Concerned Income A/c
The amount of accrued income will be added to the related income in the profit and loss account and the new account of accrued income will appear on the asset side under the head current assets of the balance sheet

Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

 Give effect of the following adjustment entry:
 The accrued rent is Rs. 1,900.  

  1. Rent A/c Dr. 1,900

    To Accrued Rent A/c 1,900

  2. Accrued Rent A/c Dr. 1,900

    To Rent A/c 1,900

  3. Accrued Rent A/c Dr. 1,900

    To Asset A/c 1,900

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

It may happen that certain items of income such as interest on loan, commission, rent, etc. are earned during the accounting year but have not been actually received  by the end of the year. Such incomes are known as accrued income. The adjustment entry for accrued income is:

Accrued Income A/c Dr.
     To Concerned Income A/c
The amount of accrued income will be added to the related income in the profit and loss account and the new account of accrued income will appear on the asset side of the balance sheet.
The effect of adjustment entry for  accrued rent of Rs. 1,900 is:
Accrued Rent A/c  Dr.      1,900     
      To Rent A/c                              1,900

Multiple choice elements of book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

Which of the following statements is not true ?

  1. Joint venture is a going concern.

  2. Joint venture is terminable in nature.

  3. Joint venture does not follow accrual basis of accounting.

  4. The co-venturer shares the profit in agreed ratio.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A joint venture is typically formed for a specific project or purpose and is temporary in nature. It is not a going concern, which is a concept applied to businesses intended to operate indefinitely.

Multiple choice elements of book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

In preparation of final accounts, preparation of manufacturing account is mandatory for all types of business organisation.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Final accounts consist mainly of trading, profiit and loss account along with balance sheet. Manufacturing is generally prepared when the business is about manufacturing any product and it shows every information related to manufacturing.

Thus every is not related to manufacturing of products and hence, maufacturing account is not prepared by every firm. So, the statement is false.