Tag: book keeping and accountancy

Questions Related to book keeping and accountancy

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

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

  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

Show answer
Correct Option: B
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.

Income received in advance will be shown as ________.

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

  1. Current asset

  2. Current liabilities

  3. Fixed asset

  4. Fixed liabilities

Show answer
Correct Option: B
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.

 Amount which has accrued but is still to be received.

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

  1. Outstanding Income

  2. Outstanding Expense

  3. Prepaid Income

  4. Prepaid Expense

Show answer
Correct Option: A
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.

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

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

  1. Pre-received income

  2. Outstanding income

  3. Capital income

  4. Revenue income

Show answer
Correct Option: A
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.  

What are the other names for income received in advance?

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

  1. Unearned Income

  2. Accrued Income

  3. Pre-received income

  4. Both A & C

Show answer
Correct Option: D
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.

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

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

  1. Asset

  2. Liabilities

  3. Debit

  4. Credit

Show answer
Correct Option: A
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.

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

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

  1. Accrued assets

  2. Accrued liability

  3. Prepaid expense

  4. Unrearned revenue

Show answer
Correct Option: B
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.

Life insurance premium received by an insurance company' should be classified as _______________.

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

  1. Accrued asset

  2. Accrued liability

  3. Prepaid expense

  4. Unearned revenue

Show answer
Correct Option: D
Explanation:

The life insurance premium should be classified as unearned revenue because against this amount still the company has to render service.  Actually the insurance company will treat each year pro-rata amount of premium received as income.  

For example insurance company receives Rs.10000 as premium for 10 years.  First it shoud be treated as unearned revenue and then each year Rs.1000 should be shifted from this account to income account.

'Interest earned but not received' should be classified as _____________.

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

  1. Accrued asset

  2. Accrued liability

  3. Prepaid expense

  4. Unearned revenue

Show answer
Correct Option: A
Explanation:

Interest that is due to the company at the end of the accounting period but not yet received is classified as accrued interest receivable.

To make the adjusting journal entry, debit the current assets account and credit income received on the income statement with the accrued amount due.

The portion of income belonging to next accounting year is called _______.

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

  1. Income received in advance

  2. Asset

  3. Capital

  4. None

Show answer
Correct Option: A
Explanation:

Sometimes earned revenue that belongs to a future accounting period is received in the current accounting period, such income is considered as income received in advance. It is also known as Unearned Income and is received before the related benefits are provided.