Question

In a mercantile system of accounting adjustment is required for _______.

• A. Prepaid expenses
• B. Outstanding expenses
• C. Accrued income/income received in advance
• D. All the three

Answer 1

The correct option is D All the three

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

Under this method, the revenue is recorded when it is earned, and the expenses are reported when they are incurred.

Hence, in this question accounting adjustment is required for prepaid expenses, outstanding expenses, accrued income/income received in advance.