17 Questions
A landlord receives Rs. 4,500,000 in rent during the year ended 30 September 2022. If the rent received in advance at the start of the year was Rs. 332,000 and at the end of the year was Rs. 145,000, what is the rental income credited to the profit and loss account for the year?
Rs. 4,753,000
A company paid an annual insurance premium of Rs. 120,000 on 1 April 2022. How much of this premium should be charged to the statement of comprehensive income as at 30 September 2022?
Rs. 60,000
What is the term for income that is received in advance of earning it?
Unearned income
Which of the following is recognized as a current asset if its realization or settlement is expected within one year?
Accrued income
What is the term for an expense that is paid in advance of its use?
Prepaid expense
What is the correct treatment for Mohtashim's unearned rental income as at 30 June 2022?
Recognise Rs. 360,000 as current liability and Rs. 240,000 as non-current liability
What is the correct adjusting entry to be passed on 31 December 2022 for Armaghan's prepaid insurance?
Dr. Insurance expense Rs. 60,000 and Cr. Prepaid insurance Rs. 60,000
Which of the following statements represents the accrual concept?
Any income which is recognized in the year of occurrence irrespective of received or not and is in arrears
What is the correct definition of prepaid expenses?
Expenses paid in advance and not related to the current year
Which of the following statements is correct about unearned revenue?
Unearned revenue is a current liability
What is the correct accounting treatment for a prepaid expense?
Debit the prepaid expense account and credit the expense account
What is the effect on profit if a maintenance expense is paid in arrears?
Profit is understated
What would be the correct treatment of the insurance premium paid on 1 May 2022?
Charge Rs. 115,000 to statement of comprehensive income and show Rs. 100,000 as prepaid expense in the statement of financial position
What would be the correct accounting treatment for the maintenance expense paid by Jamshaid?
Charge Rs. 162,000 as expense and record Rs. 44,000 as prepaid expense
What would happen to net assets if a prepaid expense is not recognized?
Net assets would be understated
What is the correct accounting treatment for accrued expenses?
Charge the expense to the statement of comprehensive income and show it as an accrued expense in the statement of financial position
What would happen to profit if a prepaid expense is not recognized?
Profit would be overstated
Test your understanding of accounting concepts with these multiple-choice questions. Covers topics such as accrued expenses, prepaid expenses, and financial statements.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
