Tag: need for adjustment, closing stock and outstanding expenses

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

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

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. 500

  2. 470

  3. 480

  4. 400

Show answer
Correct Option: C
Explanation:

Rent per month = 2400 / 15

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

When income is received in advance ___________ account is debited.

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. Expense

  2. Profit and loss

  3. Income

  4. None of these.

Show answer
Correct Option: C
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.

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

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. 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

Show answer
Correct Option: D

Drawings account of a partner will have _____________. 

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 balance

  2. credit balance

  3. either (a) or (b)

  4. neither (a) nor (b)

Show answer
Correct Option: A

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

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. Selling price

  2. Cost price

  3. Selling price or cost price whichever is higher

  4. Selling price or cost price whichever is lower

Show answer
Correct Option: B

Advance received from customers is___________. 

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. 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

Show answer
Correct Option: A

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.
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. A

  2. B

  3. C

  4. D

Show answer
Correct Option: D

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.
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. A

  2. B

  3. C

  4. D

Show answer
Correct Option: B

Choose the true statement.

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 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

Show answer
Correct Option: B

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

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. 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

Show answer
Correct Option: D