Tag: earned or accrued income

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Questions Related to earned or accrued 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

Accrued income is also been called as ________.

  1. Outstanding income

  2. Outstanding expense

  3. Prepaid income

  4. Prepaid expense
Reveal answer Fill a bubble to check yourself
A 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 income. It is the income which has been earned during a particular accounting period, also known as outstanding income. 

Examples include accrued interest, accrued rent (to be received), etc. Accrued income is recorded in the books at the end of an accounting period to show true numbers of a 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

The recording of wages earned but not yet paid is an example of an adjustment that _____________.

  1. apportions revenues between two or more periods

  2. recordings an accrued expense

  3. recordings an unrecorded revenue

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

Recording wages earned but not yet paid is an accrual adjustment, specifically recognizing an expense that has been incurred but not yet recorded in the accounts.

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

Payment received from debtor _______________.

  1. decreases the total assets

  2. increases the total assets

  3. results in no change in the total assets

  4. increases the total liabilities

  5. decreases the total liabilities
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a debtor pays, the company receives cash (an asset) and decreases accounts receivable (an asset). Since one asset increases and another decreases by the same amount, the total assets remain unchanged.

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

The account of accrued income will be shown on _________ side.

  1. debit side of profit & loss account

  2. credit side of profit & loss account

  3. debit side of trading account

  4. credit side of trading account
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 same year. Such incomes are known as accrued income. 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 on the credit side and the new account of accrued income will appear on the asset 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

Income received in advance will be shown as ________.

  1. Current asset

  2. Current liabilities

  3. Fixed asset

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

Sometimes, a certain income is received but the whole amount of it does not belong to the current period. The portion of the income which belongs to the next accounting period is termed as income received in advance or an Unearned Income. Income received in advance is adjusted by recording the following entry:

Concerned Income A/c Dr.
        To Income Received in Advance A/c 
The effect of this entry will be that the balance in he income account will be equal to the amount of income earned for the current accounting period, and the new account of income received in advance will be shown as a liability 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

 Amount which has accrued but is still to be received.

  1. Outstanding Income

  2. Outstanding Expense

  3. Prepaid Income

  4. Prepaid Expense
Reveal answer Fill a bubble to check yourself
A 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 income. It is also known as Outstanding income. 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 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

 When income is received but the whole amount of it does not belong to the current period it is called as:

  1. Pre-received income

  2. Outstanding income

  3. Capital income

  4. Revenue income
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Sometimes, a certain income is received but the whole amount of it does not belong  to the current period. The portion of the income which belongs to the next accounting period is termed as income received in advance. It is also known as Unearned Income or Pre-received Income. Income received in advance is adjusted by recording the following entry:

Concerned Income A/c Dr.
    To Income Received in advance A/c
The effect of this entry will be that the balance in the income account will be equal to the amount of income earned for the current accounting period and the new account of income received in advance will be shown as a liability 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

What are the other names for income received in advance?

  1. Unearned Income

  2. Accrued Income

  3. Pre-received income

  4. Both A & C
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Sometimes a certain income is received but the whole amount of it does not belong to the current period. The portion of the income which belongs to the next accounting period is termed as income received in advance. The other names for income received in advance is known as an Unearned Income or Pre-received Income. Income received in advance is adjusted by recording the following entry:

Concerned Income A/c Dr. 
      To Income received in advance A/c
The effect of this entry will be that the balance in the income account will, be equal to the amount of income earned for the current accounting period, and the new account of income received in advance will be shown on the liability 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

Accrued income will appear on the ____ side of the balance sheet. 

  1. Asset

  2. Liabilities

  3. Debit

  4. Credit
Reveal answer Fill a bubble to check yourself
A 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 income. 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 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

' Taxes owned but payable in the following period' should be classified as __________________.

  1. Accrued assets

  2. Accrued liability

  3. Prepaid expense

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

Examples of Accrued Liabilities Employees may have performed work but have not yet received wages. Interest on loans may be accrued if interest fees have been incurred since the previous loan payment. Taxes owed to governments may be accrued because they may not be due until the next tax reporting period.