Tag: need for adjustment, closing stock and outstanding expenses

Quizzes (0) Questions (68)

Questions Related to need for adjustment, closing stock and outstanding expenses

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

Rent Received Rs 2400 is for 15 months than Rs ________ is pre received income.

  1. 500

  2. 470

  3. 480

  4. 400
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Rent per month = 2400 / 15

                           = 160 Rs
Rent for 12 months = 160 * 12 = Rs 1920
Then, Prepaid expenses is 160 * 3 = Rs 480.

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

When income is received in advance ___________ account is debited.

  1. Expense

  2. Profit and loss

  3. Income

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

 When a company receives money in advance of earning it, the accounting entry is a debit to the asset Cash for the amount received and a credit to the liability account such as Customer Advances or Unearned Revenues.

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

If Incomes received in advance appears in the trial balance, it__________.

  1. will be shown in Profit and Loss Account by way of deduction from the income received

  2. will be credited to Profit and Loss Account

  3. will not be shown any where

  4. will be shown on the liabilities side of the balance sheet only
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

If an item appears in the trial balance, it has already been recorded in the books. Income received in advance is a liability, so it is shown on the liabilities side 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

Drawings account of a partner will have _____________. 

  1. debit balance

  2. credit balance

  3. either (a) or (b)

  4. neither (a) nor (b)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Drawings represent a reduction in the partner's capital. Since capital accounts have credit balances, drawings are debited to the partner's account to reflect this reduction.

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

When the proprietor withdraws or takes away some goods from the business for his personal use of consumption, he records the withdrawals at ________________.

  1. Selling price

  2. Cost price

  3. Selling price or cost price whichever is higher

  4. Selling price or cost price whichever is lower
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When goods are withdrawn for personal use, they are removed from inventory at their cost price to ensure the business does not record a profit on transactions with itself.

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

Advance received from customers is___________. 

  1. an item of current liability

  2. an item of non-current asset

  3. an item of contingent liability

  4. an item of non-cash cost
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Money received in advance from customers for goods or services not yet provided represents an obligation to perform or refund, which is classified as a current liability.

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

While preparing final account, to record outstanding income which of the following adjustment entry will be passed?

Income A/cTo Outstanding Income A/c Dr.
Outstanding Expenses A/cTo Income A/c Dr.
Profit & Loss A/cTo Outstanding Income A/c Dr.
Outstanding Income A/cTo Income A/c Dr.

  1. A

  2. B

  3. C

  4. D
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Outstanding income is income earned but not yet received. To record this, we debit the asset account (Outstanding Income) and credit the income account to recognize the revenue in the current period.

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

While preparing final account, to adjust income received in advance which of the following adjustment entry will be passed?

Income Received in Advance A/cTo Income A/c Dr.
Income A/cTo Income Received in Advance A/c Dr.
Income Received in Advance A/cTo Outstanding Income A/c Dr.
Income Received in Advance A/cTo Profit & Loss A/c Dr.

  1. A

  2. B

  3. C

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

Income received in advance must be removed from the current income account because it has not been earned yet. We debit the income account and credit the liability account (Income Received in Advance).

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

Choose the true statement.

  1. Accrued incomes represent income unearned but realized in cash

  2. Accrued incomes represent income earned but not realized in cash

  3. Accrued income A/c is shown on the liability side

  4. No tax is payable on accrued income
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accrued income is revenue that has been earned by providing goods or services, but for which payment has not yet been received. It is an asset to the business.

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

Which of the following accounting treatments is/are TRUE in respect of accrued commission appearing on the debit side of a trial balance?

  1. It is shown on the debit side of the Profit & Loss A/c

  2. It is shown on the credit side of the Profit & Loss A/c

  3. It is shown on the liabilities side of the Balance Sheet

  4. It is shown on the assets side of the Balance Sheet
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

If an item appears on the debit side of the trial balance, it is an asset or an expense. Accrued commission is an asset because it is income earned but not yet received.