Financial Statements 2 Test 19

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Financial Statements 2 Test 19

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Weekly Quiz Competition

Question 1
1 / -0

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

A
Profit & Loss A/c and Assets side of Balance Sheet

B
Profit & Loss A/c and Liabilities side of Balance Sheet

C
Assets side of Balance Sheet

D
Liabilities side of Balance Sheet

Solution

Prepaid Rent A/c is shown on the Assets side (under current assets) in the Balance Sheet. It reports the amount of future rent expense that was paid in advance of the rental period.
Question 2
1 / -0

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

A
A liability and a debit balance

B
An asset and a debit balance

C
An asset and a credit balance

D
None of the above

Solution

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.
Question 3
1 / -0

Advance received from customers is___________.

A
an item of current liability

B
an item of non-current asset

C
an item of contingent liability

D
an item of non-cash cost
Question 4
1 / -0

Prepaid expenses are valued on the Balance Sheet at.

A
Replacement cost

B
Current cost

C
Cost to acquire less accumulated amortization

D
Cost less expired portion
Question 5
1 / -0

The adjustment to be made for prepaid expenses is ___________.

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

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

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

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

Solution

When prepaid expenses are given outside the trial balance it will be treated as an Adjustment and will be posted at two places:
1. First, it will be deducted from the concerned expenses in the debit side of Profit and Loss Account, and
2. Then, it will be treated as current assets and will be posted in the Assets side of the Balance Sheet.
Question 6
1 / -0

Which of the following statements is/are NOT correct?

A
Provision for bad debts appears as a liability on the balance sheet

B
The provision for bad debts is owed to the proprietor

C
Bad debts could be less than the provision for bad debts

D
Bad debts could exceed the provision for bad debts
Question 7
1 / -0

In case of final accounts of manufacturing concerns closing stock of finished goods appears in __________ & ____________.

A
Manufacturing Account, Balance Sheet

B
Trading Account, Balance Sheet

C
Profit & Loss Account, Balance Sheet

D
Manufacturing Account, Trading Account
Question 8
1 / -0

Following are the extracts from the Trial Balance of a firm:
Particulars Dr. (Rs) Cr. (Rs)
Sundry debtors $$5,00,000$$ -
Provision for doubtful debts - $$50,000$$
Bad debts $$30,000$$ -
Additional information:
(I) Additional bad debts $$Rs. 30,000$$
(II) Keep the provision for bad debts @ $$10$$% on debtors.
The net amount of provision for bad debts that will appear in the Profit and Loss Account will be ________.

A
$$Rs. 80,000$$

B
$$Rs. 75,000$$

C
$$Rs. 57,000$$

D
$$Rs. 45,000$$

Solution
Question 9
1 / -0

In a Trial balance, debtors appear at $$Rs. 4,50,000$$. Provision for doubtful debts at $$5$$% is to be made after considering the following adjustments:
1. An amount of $$Rs. 10,000$$ is included in debtor who is bankrupt and his estate is expected to realize $$50$$ (fifty) paise in the rupee.
2. Debtors include an amount of $$Rs. 20,000$$ for goods supplied to proprietor
3. Bills receivable include a dishonoured bill for $$Rs. 10,000$$
4. Goods sold on 'Sales or Return' basis not approved by the customer for $$Rs. 50,000$$ recorded as sale
5. Debtors include an amount of $$Rs. 5,000$$ from a customer whose financial position is very doubtful
The total provisions to be made for doubtful debts is ________.

A
$$Rs. 28,750$$

B
$$Rs. 22,500$$

C
$$Rs. 24,250$$

D
None of these
Question 10
1 / -0

If actual bad debts are more than the provision for bad debts, then there will be a.

A
Credit balance of provision for bad debts account

B
Debit balance of provision for bad debts account

C
Debit balance of bad debts account

D
Debit balance of discount on debtors account

Solution

Provision for bad debt A/c is having credit balance whereas Bad debt A/c is having debit balance. When the actual bad debt is more than the provision for bad debts, Bad debts will be adjusted against the provision for bad debt and the remaining debit balance in bad debt A/c will be shown on the debit side of profit and loss A/c.
Therefore, C is the correct option.

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Particulars	Dr. (Rs)	Cr. (Rs)
Sundry debtors	$$5,00,000$$	-
Provision for doubtful debts	-	$$50,000$$
Bad debts	$$30,000$$	-

Financial Statements 2 Test 19

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Financial Statements 2 Test 19

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Question 1

Profit & Loss A/c and Assets side of Balance Sheet

Profit & Loss A/c and Liabilities side of Balance Sheet

Assets side of Balance Sheet

Liabilities side of Balance Sheet

Solution

Question 2

A liability and a debit balance

An asset and a debit balance

An asset and a credit balance

None of the above

Solution

Question 3

an item of current liability

an item of non-current asset

an item of contingent liability

an item of non-cash cost

Question 4

Replacement cost

Current cost

Cost to acquire less accumulated amortization

Cost less expired portion

Question 5

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

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

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

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

Solution

Question 6

Provision for bad debts appears as a liability on the balance sheet

The provision for bad debts is owed to the proprietor

Bad debts could be less than the provision for bad debts

Bad debts could exceed the provision for bad debts

Question 7

Manufacturing Account, Balance Sheet

Trading Account, Balance Sheet

Profit & Loss Account, Balance Sheet

Manufacturing Account, Trading Account

Question 8

$$Rs. 80,000$$

$$Rs. 75,000$$

$$Rs. 57,000$$

$$Rs. 45,000$$

Solution

Question 9

$$Rs. 28,750$$

$$Rs. 22,500$$

$$Rs. 24,250$$

None of these

Question 10

Credit balance of provision for bad debts account

Debit balance of provision for bad debts account

Debit balance of bad debts account

Debit balance of discount on debtors account

Solution

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