Adjustment for Prepaid Expenses

Q.

What is the adjusting entry for prepaid expenses?

1. Expenses A/c Dr

   To Cash A/c

2. None of these

3. Expenses A/c Dr

   To Prepaid expenses A/c

4. Prepaid expenses A/c Dr

   To Expenses A/c

Q.

Expenses paid in advance are called ___

1. Outstanding Expenses

2. Accrued Expenses

3. Expenses Payable

4. Prepaid Expenses

Q.

Why are the rules of debit and credit same for both liability and capital?

Q.

Which of the following adjusting entry is correct for prepaid expenses?

1. None of these

2. Expenses A/c Dr

   To Prepaid expenses A/c

3. Prepaid expenses A/c Dr

   To Expenses A/c

4. Cash A/c Dr

   To Prepaid expenses A/c

Q.

Raghav started a real extate agency business with a cash investment of Rs. 42, 000. The following business transactions have been recorded
(i) Paid 3 months advance rent for office accommodation Rs.2, 520
(ii) Bought car for office Rs.25, 200
(iii) Purchased office furniture Rs. 8, 400.
(iv) Bought office typewriter from Comprehensive Company Rs. 3, 600.
(v) Sold extra office furniture at cost to Amar for Rs. 1, 200. Amar paid Rs. 720 in cash and accepted a bill at 3 months for the balance.
(vi) Veer paid the amount of the bill at maturity and Amar paid half the amount he owed to comprehensive comany.
(vii) Collected Rs. 7, 200 as commission.
(viii) Paid telephone bill amounting Rs. 180.

Q.

Prepaid expenses are regarded as ___

1. Capital

2. Asset

3. Liability

4. Loss

Q. From the following balances taken from the books of Hari & Co., prepare Trading and Profit and Loss Account for the year ended 31st March, 2018 and Balance Sheet as at that date:

	₹		₹
Capital	3, 50, 000	Salaries	11, 100
Building	1, 87, 500	Discount Allowed	3, 000
Machinery	92, 500	Interest on Investments	1, 000
Debtors	35, 000	Stock (1st April, 2017)	1, 65, 000
Investment	35, 000	Bills Payable	50, 000
General Expenses	8, 000	Sales	6, 35, 000
Rent Paid	37, 100	Purchases	4, 68, 500
Proprietor's Drawings	6, 500	Wages	25, 000
Electricity Charges	1, 900	Cash in Hand	18, 000
Carriage Inwards	8, 500	Sundry Creditors	1, 00, 000
Cash at Bank	30, 000	Returns Inward	4, 500
Returns Outward	1, 100

Closing Stock was valued at ₹ 1, 82, 100.

Q.

Trial balance of Radhika did not agree. Radhika put the difference to suspense account. subsequently she located the following errors.

1) Furniture purchased for Rs 6, 000 was posted to purchases account as Rs 600.
2) Repairs to Machinerry Rs 500 were debited to Machinery account.
3) Wages paid for installation of Machinery Rs 750 was posted to wages account.
4) Purchased material Rs 8, 000 and wages Rs 2, 000 were used for construction of building not recorded in the books.
5) Total of sales returns book Rs 2, 000 was not posted to the ledger.
6) Old Furniture sold to Dinesh at its book value of Rs 2, 500 was recorded through sales book.

Q. For passing an adjustment entry for recording prepaid expenses account is debited and account is credited

1. Cash
2. Expenses
3. Prepaid expenses
4. Profit or loss

Q.

For the financial year 2017-18, which of the following is adjusted and considered as a prepaid expense?

1. Insurance premium paid for the period of 6 months commencing from 1st May 2017

2. Insurance premium paid for the period of 12 months commencing from 1st May 2017

3. None of the above

4. Insurance premium paid for the period of 10 months commencing from 1st May 2017

Q. Question

Q.

Rent has been paid on 1st January 2018 for a period of 6 months amounting to Rs 60, 000 @ 10, 000 per month. By what amount shall the prepaid expenses account be debited, while passing the adjustment entry?

1. It shall be debited by Rs 20, 000

2. It shall be debited by Rs 10, 000

3. It shall be debited by Rs 30, 000

4. It shall not be debited

Q.

Mr Arun paid the salary of his helper in shop amounting to Rs 25, 000 per month for 2 months i.e. March & April 2018 in the month of March only. Which of the following is the correct adjustment entry for the same?

1. Outstanding salary A/c Dr	50, 000
   To Salary A/c	50, 000

2. Salary A/c Dr	25, 000
   To prepaid salary A/c	25, 000

3. Prepaid Salary A/c Dr	50, 000
   To Salary A/c	50, 000

4. Prepaid Salary A/c Dr	25, 000
   To Salary A/c	25, 000

Q.

Which of the following shall need adjustments in accounting?

1. Prepaid expenses

2. Outstanding expenses

3. All the above

4. Accrued income

Q.

What do you understand by prepaid expenses?

1. Amount which has been paid for a relative

2. Expenses which have been paid for a subsidiary company

3. Expenses which have been paid for household purposes

4. Expenses paid within the accounting period, but benefits are reaped later