Accounting Multiple Choice Questions

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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. 4,621,000

Rs. 4,247,000

Rs. 4,500,000

Rs. 4,753,000 (correct)

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. 80,000

Rs. 90,000

Rs. 60,000 (correct)

Rs. 40,000

What is the term for income that is received in advance of earning it?

Accrued expense

Accrued income

Prepaid expense

Unearned income (correct)

Which of the following is recognized as a current asset if its realization or settlement is expected within one year?

Accrued income Signup and view all the answers

What is the term for an expense that is paid in advance of its use?

Prepaid expense Signup and view all the answers

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 Signup and view all the answers

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 Signup and view all the answers

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 Signup and view all the answers

What is the correct definition of prepaid expenses?

Expenses paid in advance and not related to the current year Signup and view all the answers

Which of the following statements is correct about unearned revenue?

Unearned revenue is a current liability Signup and view all the answers

What is the correct accounting treatment for a prepaid expense?

Debit the prepaid expense account and credit the expense account Signup and view all the answers

What is the effect on profit if a maintenance expense is paid in arrears?

Profit is understated Signup and view all the answers

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 Signup and view all the answers

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 Signup and view all the answers

What would happen to net assets if a prepaid expense is not recognized?

Net assets would be understated Signup and view all the answers

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 Signup and view all the answers

What would happen to profit if a prepaid expense is not recognized?

Profit would be overstated Signup and view all the answers