• Outstanding and prepaid expenses - class-XI
Back
0

Outstanding and prepaid expenses - class-XI

Description: outstanding and prepaid expenses
Number of Questions: 31
Created by:
Tags: accountancy elements of accounts book keeping and accountancy adjustments in preparation of financial statements final accounts with adjustments adjustments final accounts of sole proprietors - 2 financial statements - ii financial statements of business organisations financial statements final accounts of a proprietary concern
Start the Quiz
Attempted 0/31 Correct 0 Score 0
‹
›

Unemployment due to mechanization of agriculture is ___________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Seasonal

  2. Structural

  3. Industrial

  4. Personal

Show answer
Correct Option: B

Bonus under Halsey plan is paid ____________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. at 50% of time saved

  2. at 75% of time saved

  3. at 80% of time saved

  4. at 90% of time saved

Show answer
Correct Option: A

Which of the following items will have a debit balance?

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Income received in advance

  2. Bank loan

  3. Prepaid insurance premium

  4. Reserve for doubtful debts

Show answer
Correct Option: C

Which of the following stock exchange is derecognized by SEBI on 19.11.2014 on the allegations of serious irregularities in its functioning?

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Bombay Stock Exchange

  2. Delhi Stock Exchange

  3. Calcutta Stock Exchange

  4. Bangalore Stock Exchange

Show answer
Correct Option: B

 The amount of prepaid expense is ________ from the total of the particular expense.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. added

  2. deducted

  3. neutralized

  4. None of the Above

Show answer
Correct Option: B
Explanation:

There are several items of expense which are paid in advance in the normal course of business operations. At the end of the accounting period, it is found that the benefits of such expense are not yet been fully received; a portion of its benefit would be received in the next accounting year. This portion of expense, is carried forward to the next year and is termed as prepaid expenses. The necessary adjustment in respect of prepaid expenses is:

Prepaid expense A/c Dr.
         To Concerned expense A/c
The effect of the above adjustment entry is that the amount of prepaid part is deducted from the total of the particular expense, and the new account of prepaid expense is shown on the liabilities side of the balance sheet.

Discuss the effect of the following transaction:

Ms. Pooja earns Rs. 2,000 per month. Her salary account is debited by Rs. 30,000 at the end of the year.  

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Rs. 6,000 is the outstanding expense

  2. Rs. 30,000 is asset

  3. Rs. 6,000 is the prepaid expense

  4. Rs. 30,000 is liabilities

Show answer
Correct Option: C
Explanation:

The necessary adjustment in respect of prepaid expenses is made by recording the following entry:

Prepaid expense A/c Dr.
      To Concerned expense A/c
The effect of the above adjustment entry is that the amount of prepaid part is deducted from the total of the particular expense, and the new account of prepaid expense is shown on the assets side of the balance sheet.

Ms. Pooja earns Rs. 2,000 per month. Her salary account is debited by Rs. 30,000 at the end of the year. This implies that Pooja has over payment of Rs. 6,000 in his salary account. Hence, correct expense on account of salary during the current period will be Rs. 24,000 instead of Rs. 30,000. 
Rs. 24,000 is to be shown as expense on account of salary in profit and loss account and recognize a current asset of Rs. 6,000 as an advance salary.
 It will be termed as prepaid expense.

 Expenses which are paid in advance is termed as _____.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Prepaid expense

  2. Outstanding expense

  3. Unpaid expense

  4. None of the above

Show answer
Correct Option: A
Explanation:

There are several items of expense which are paid in advance in normal course of business operations. At the end of the accounting year, it is found that the benefits of such expenses have not been fully received; a portion of its benefit would be received in the next accounting year. This portion of expense, is carried forward to the next year and is termed as prepaid expenses. The necessary adjustment in respect of prepaid expenses is made by recording the following entry:

Prepaid Expense A/c Dr.
       To Concerned Expense A/c
The effect of the above adjustment entry is that amount of prepaid part is deducted from the total of the particular expense, and the prepaid account is shown on the assets side of the balance sheet.

'Subscriptions collected in advance by a publisher' should be classified as _________________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Accrued asset

  2. Accrues liability

  3. Unearned revenue

  4. Prepaid expense

Show answer
Correct Option: C
Explanation:

 Deferred revenue is common with subscription-based products or services that require prepayments. Examples of unearned revenue are rent payments received in advance, prepayment received for newspaper subscriptions, annual prepayment received for the use of software, and prepaid insurance.

Outstanding and prepaid expenses and incomes are taken into account in determining profit or loss under _________________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Cash system of accounting.

  2. Mercantile system of accounting.

  3. Both (A) and (B).

  4. None of the above.

Show answer
Correct Option: B
Explanation:

Accrual system of Accounting is also known as the mercantile system of accounting wherein the transactions are recognized and recorded as and when they take place. 

Under the accrual accounting method, the revenue is recorded when it is actually earned, and the expenses are reported when they are incurred.
Hence,Outstanding and prepaid expenses and incomes are taken into account in determining profit or loss under mercantile /Accrual system of accounting.

When item is shown on the debit side of a trial balance?

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Purchase returns

  2. Rent Outstanding

  3. Prepaid Expenses

  4. None

Show answer
Correct Option: C
Explanation:

A trial balance is the accounting equation of our business laid out in detail. It has our assets, expenses and drawings on the left (the debit side) and our liabilities, revenue and owner's equity on the right (the credit side)

Hence , Prepaid expense is an expense which is shown in Dr. side.

'A three years premium paid on a fire insurance policy' should be classified as _______________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Accrued asset

  2. Accrued liability

  3. Unearned revenue

  4. Prepaid expense

Show answer
Correct Option: D
Explanation:

A prepaid expense refers to an amount that a company has paid and a portion or all of it will be an expense in a later accounting period.

A prepaid expense can be recorded initially as an expense or as a current asset. 

Expenses Paid in advance are called ________. 

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Prepaid Expense

  2. O/s Expense

  3. Asset

  4. Liability

Show answer
Correct Option: A
Explanation:

Prepaid expenses are future expenses that have been paid in advance. In other words, prepaid expenses are costs that have been paid but are not yet used up or have not yet expired.

Ascertain the amount of prepaid expense if insurance of Rs. 10000 paid for one year ending on 30.06.2018 and firm closes the books on 31.03.2018.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. 5000

  2. 4500

  3. 2500

  4. 2000

Show answer
Correct Option: A
Explanation:

Amount of Prepaid expense for year ending 30th june ,2018 

 =  10000 * 3 / 6
= 5000

Prepaid expenses is shown under ___________ side of balance side.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Asset

  2. Liability

  3. Debit

  4. Credit

Show answer
Correct Option: A
Explanation:

Generally, the amount of prepaid expenses that will be used up within one year are reported on a company's balance sheet as a current asset. As the amount expires, the current asset is reduced and the amount of the reduction is reported as an expense on the income statement.


Amount of prepaid expense is _______ from particular expense.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Added

  2. Deducted

  3. Depreciated

  4. None

Show answer
Correct Option: B
Explanation:

When expenses are paid they are deducted. However, because of the general rule regarding prepaid expenses, simply prepaying an expense does not make it immediately deductible (barring an exception due to the 12-month rule).

Income received in advance is _______.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. A liability

  2. An asset

  3. An income

  4. An expense

Show answer
Correct Option: A
Explanation:

Under the accrual method of accounting, income that is received in advance is a liability because the company that received the money has not yet earned it and it has an obligation (a liability) to deliver the related goods or services in the future.

Rent prepaid a/c appearing in the trial balance is ___________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. shown on the liability side of balance sheet

  2. shown on the assets side of the balance sheet

  3. shown on debit side of profit and loss A/c

  4. credited to profit and loss A/c

Show answer
Correct Option: B

A club paid subscription fees of Rs. 1,400, out of which Rs. 200 is prepaid. In such case _________________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. P & L A/c is debited with Rs.1,400

  2. P & L A/c is debited with Rs. 1,200

  3. Rs. 200 is shown as current asset

  4. Both (B) and (C)

  5. Both (A) and (C)

Show answer
Correct Option: D
Explanation:

Subscription fees prepaid is a current asset as its benefit will be received within a period of one year. 

Also, we debit expenses only related to the current financial year to the Profit and loss account.
Thus, the journal entry will be:
Profit and Loss A/c   .....Dr.                1200
Prepaid Subscription fees A/c ......Dr. 200
To Subscription fees A/c                               1400
Thus, option D is correct.

Prepaid insurance has an opening balance of Rs. 2,300. During the period, insurance of Rs. 1,200 expired. The adjusting entry would contain a credit _____________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. to prepaid insurance for Rs. 1,200

  2. to insurance expenses for Rs. 1,200

  3. to unexpired insurance for Rs. 1,100

  4. to insurance expense for Rs. 1,100

Show answer
Correct Option: A

If prepaid rent appears in trial balance, while preparing the final accounts it will be shown in.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Profit & Loss A/c and asset side of balance sheet

  2. Profit & Loss A/c and liability side of balance sheet

  3. Asset side of balance sheet

  4. Liability side of balance sheet

Show answer
Correct Option: C

A prepayment of insurance premium will appear in the Balance Sheet and in the Insurance Account respectively as.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. A liability and a debit balance

  2. An asset and a debit balance

  3. An asset and a credit balance

  4. None of the above

Show answer
Correct Option: B
Explanation:

A current asset which indicates the cost of the insurance contract (premiums) that have been paid in advance. It represents the amount that has been paid but has not yet expired as of the balance sheet date. A related account is Insurance Expense, which appears on the income statement and shown on balance sheet as asset.

The adjustment to be made for prepaid expenses is?

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Add prepaid expenses to respective expenses and show it as an asset

  2. Deduct prepaid expenses from respective expenses and show it as an asset

  3. Add prepaid expenses to respective expenses and show it is a liability

  4. Deduct prepaid expenses from respective expenses and show it as a liability

Show answer
Correct Option: B

While preparing final account, to adjust prepaid expenses which of the following adjustment entry will be passed?

Prepaid Expenses A/cTo Expenses A/c Dr.
Outstanding Expenses A/cTo Prepaid Expenses A/c Dr.
Prepaid Expenses A/cTo Outstanding Expenses A/c Dr.
Prepaid Expenses A/cTo Profit & Loss A/c Dr.
book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. A

  2. B

  3. C

  4. D

Show answer
Correct Option: A

Prepaid expenses are valued on the Balance Sheet at.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Replacement cost

  2. Current cost

  3. Cost to acquire less accumulated amortization

  4. Cost less expired portion

Show answer
Correct Option: D

If the insurance premium paid is Rs. $1,000$ and prepaid insurance is Rs. $300$, the amount of insurance premium shown in Profit & Loss A/c will be.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Rs. $1,300$

  2. Rs. $700$

  3. Rs. $1,000$

  4. Rs. $300$

Show answer
Correct Option: B

In case of unexpired entry following entry should be made ______________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. It should be shown as an asset in the balance sheet

  2. It is shown as a expense in profit and loss account

  3. Both a & b

  4. None of the above

Show answer
Correct Option: C

Insurance paid in advance would be treated in the Balance sheet as _________________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Non current asset

  2. Current asset

  3. Intangible sheet

  4. Deferred expense

Show answer
Correct Option: A

If the insurance Rs.premium paid is Rs.$1,000$ and prepaid insurance is Rs.$300$, the amount of Insurance premium shown in profit and loss account will be _____________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Rs.$1,300$

  2. Rs.$700$

  3. Rs.$1,000$

  4. Rs.$300$

Show answer
Correct Option: A

Prepaid Insurance is an example of __________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Increase in asset & decrease in owner's liability

  2. Increase in liability & decrease in owner's liability

  3. Decrease in liability & owner's liability

  4. Increase in asset & owner's liability

Show answer
Correct Option: D

Prepaid Expense of Financial Year related with ___________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Previous Financial Year

  2. Following Financial Year

  3. Current Financial Year

  4. None

Show answer
Correct Option: B

What will be the treatment of prepaid expenses if adjustment of it is appearing outside the trial Balance?

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Prepaid Expenses account will be debited and respective expenses account will be credited

  2. Respective expense account will be debited and prepaid expenses account will be credited

  3. Prepaid expenses account will be debited and profit and loss account will be credited

  4. Profit and loss account will be debited and prepaid expenses account will be credited

Show answer
Correct Option: A
Explanation:

Prepaid expenses are deducted from the respective accounts in trading and P & L A/c and shown in asset side in the balance sheet.

- Hide questions
ADVERTISEMENT

Find more quizzes from top tags

general knowledge
3615 Quizzes
119858 Questions
 technology
307 Quizzes
36705 Questions
 sports
963 Quizzes
19148 Questions
 history
1187 Quizzes
13475 Questions
 physics
598 Quizzes
13441 Questions
 biology
1160 Quizzes
12174 Questions
 science & technology
551 Quizzes
11015 Questions
 chemistry
490 Quizzes
9892 Questions
 maths
518 Quizzes
9324 Questions
 softskills
0 Quizzes
7131 Questions