Financial Statements 2 Test 16

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Financial Statements 2 Test 16

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Question 1
1 / -0

The adjustment to be made for outstanding expenses is ________________________.

A
Add outstanding expenses to respective expenses and show it as asset

B
Deduct outstanding expenses from respective expenses and show it as liability

C
Add outstanding expenses to respective expenses and show it as liability

D
Deduct outstanding expenses from respective expenses and show it as asset

Solution

Outstanding expenses which are liability account must be recorded in the accounting period, if they relate to the accounting year.
Question 2
1 / -0

The adjustment to be made for interest on drawing is ___________________.

A
Debit Profit and loss Account and Add Interest to drawings.

B
Credit Profit and loss Account and Add Interest to drawings.

C
Debit Profit and loss Account and Deduct Interest to drawings.

D
Credit Profit and loss Account and Deduct Interest to drawings.

Solution

The double effect of interest on Drawings is:
1. It is credited to the Profit & Loss Account.
2. It is added to the Drawings and then deducted from Capital, in Balance Sheet (liability side).
Question 3
1 / -0

If the manager is entitled to a commission of $$5\%$$ on profits before deducting this commission, he will get a commission of Rs. __________ on a profit of Rs. 8400.

A
400

B
442.11

C
420

D
None of these

Solution

Commission = 5% on profit
Profit = Rs. 8400
Commission on the profit = 8400 x 5%
= 420

The manager will get commission of Rs. 420
Question 4
1 / -0

Which of the following is an example of an adjusting entry?

A
Recording the purchase of goods an account.

B
Recording depreciation of a truck.

C
Recording the billing of customers for services rendered.

D
Recording the payment of wages to employees.

Solution

Adjusting entries refers to a set of journal entries recorded at the end of the accounting period to have an updated and accurate balances of all the accounts. Adjusting entries are mere application of the accrual basis of accounting and not based on transactions. For example, accrued interest on loan, depreciation, writing off prepaid expenses, etc.
Question 5
1 / -0

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 _____________.

A
to prepaid insurance for Rs. 1,200

B
to insurance expenses for Rs. 1,200

C
to unexpired insurance for Rs. 1,100

D
to insurance expense for Rs. 1,100
Question 6
1 / -0

Adjusting entries are essential to the ___________.

A
Matching rule

B
Accrual accounting

C
Aroper determination of net income

D
All of these

Solution

Before financial statements are prepared, additional journal entries, called adjusting entries, are made to ensure that the company's financial records adhere to the revenue recognition and matching principles. Adjusting entries are necessary because a single transaction may affect revenues or expenses in more than one accounting period and also because all transactions have not necessarily been documented during the period. Each adjusting entry usually affects one income statement account (a revenue or expense account) and one balance sheet account (an asset or liability account)
Question 7
1 / -0

An adjusting entry to accrued wages earned but not yet paid is an example of _______________.

A
Adjusting recorded costs with the appropriate accounting periods

B
Adjusting recorded revenue with the appropriate accounting periods

C
Reflecting unrecorded expenses incurred during the accounting period

D
Reflecting unrecorded revenue earned during the accounting period.

Solution

Unpaid Wages Under the accrual basis of accounting, unpaid wages that have been earned by employees but have not yet been recorded in the accounting records should be entered or recorded through an accrual adjusting entry which will: Debit Wages Expense. Credit Wages Payable or credit Accrued Wages Payable.
Question 8
1 / -0

If the estimated amount of depreciation on equipment for a period is Rs. 2,000, the adjusting entry to record depreciation would be _______________.

A
Debit depreciation expense Rs. 2,000; credit equipment Rs. 2,000

B
Debit equipment Rs. 2,000; credit depreciation expense Rs.2,000

C
Debit depreciation expense Rs. 2,000; credit accumulated depreciation Rs. 2,000

D
Debit accumulated depreciation Rs. 2,000; credit depreciation expense Rs. 2,000

Solution

The journal entry to record depreciation is:
Depreciation a/c Dr.
To Accumulated Depreciation a/c.
Hence, option (c) is correct.
Question 9
1 / -0

Adjusting entries are essential to _______________.

A
Matching rule

B
Accrual accounting

C
A proper determination of net income

D
All of these
Question 10
1 / -0

The recording of wages earned but not yet paid is an example of an adjustment that _____________.

A
apportions revenues between two or more periods

B
recordings an accrued expense

C
recordings an unrecorded revenue

D
None of the above.

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Financial Statements 2 Test 16

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Financial Statements 2 Test 16

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SHARING IS CARING

Question 1

Add outstanding expenses to respective expenses and show it as asset

Deduct outstanding expenses from respective expenses and show it as liability

Add outstanding expenses to respective expenses and show it as liability

Deduct outstanding expenses from respective expenses and show it as asset

Solution

Question 2

Debit Profit and loss Account and Add Interest to drawings.

Credit Profit and loss Account and Add Interest to drawings.

Debit Profit and loss Account and Deduct Interest to drawings.

Credit Profit and loss Account and Deduct Interest to drawings.

Solution

Question 3

400

442.11

420

None of these

Solution

Question 4

Recording the purchase of goods an account.

Recording depreciation of a truck.

Recording the billing of customers for services rendered.

Recording the payment of wages to employees.

Solution

Question 5

to prepaid insurance for Rs. 1,200

to insurance expenses for Rs. 1,200

to unexpired insurance for Rs. 1,100

to insurance expense for Rs. 1,100

Question 6

Matching rule

Accrual accounting

Aroper determination of net income

All of these

Solution

Question 7

Adjusting recorded costs with the appropriate accounting periods

Adjusting recorded revenue with the appropriate accounting periods

Reflecting unrecorded expenses incurred during the accounting period

Reflecting unrecorded revenue earned during the accounting period.

Solution

Question 8

Debit depreciation expense Rs. 2,000; credit equipment Rs. 2,000

Debit equipment Rs. 2,000; credit depreciation expense Rs.2,000

Debit depreciation expense Rs. 2,000; credit accumulated depreciation Rs. 2,000

Debit accumulated depreciation Rs. 2,000; credit depreciation expense Rs. 2,000

Solution

Question 9

Matching rule

Accrual accounting

A proper determination of net income

All of these

Question 10

apportions revenues between two or more periods

recordings an accrued expense

recordings an unrecorded revenue

None of the above.

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