Chapter MCQ Test 2 — Financial Statements with Adjustments — II
10 Questions • 12 min • Chapter MCQ
12:00
Question 1 of 10
Debtors Rs 2,00,000; further bad debts Rs 10,000; provision for doubtful debts 6%. The debtors shown in the balance sheet are:
Rs 1,78,600
Rs 1,90,000
Rs 1,88,000
Rs 1,80,000
Explanation: Net debtors 1,90,000; provision 6% = 11,400; balance sheet debtors = 1,90,000 − 11,400 = 1,78,600.
Question 2 of 10
Wages Rs 30,000 in the trial balance and 'wages outstanding Rs 4,000' as an adjustment. The Trading Account shows wages of:
Rs 34,000
Rs 30,000
Rs 26,000
Rs 4,000
Explanation: Wages are a direct expense; add the outstanding 4,000 → 34,000 in the Trading Account (and 4,000 as a liability).
Question 3 of 10
Why is closing stock usually NOT in the trial balance, yet appears twice in the final accounts?
It is an adjustment (valued at year-end), so it has a double effect
It is a trial-balance item used twice
It is an error
It is capital
Explanation: Closing stock is found by valuation after the trial balance, making it an adjustment with two effects.
Question 4 of 10
Old provision for doubtful debts Rs 6,000; new provision required Rs 9,000; further bad debts Rs 2,000. The amount charged to P&L is:
Rs 5,000
Rs 9,000
Rs 11,000
Rs 3,000
Explanation: P&L charge = bad debts 2,000 + new provision 9,000 − old provision 6,000 = 5,000.
Question 5 of 10
Manager's commission of 10% on net profit BEFORE charging such commission, where profit before commission is Rs 55,000, equals:
Rs 5,500
Rs 5,000
Rs 6,050
Rs 4,500
Explanation: 10% of 55,000 = 5,500 when commission is on profit before charging it.
Question 6 of 10
Insurance Rs 24,000 was paid for the year ending 30 June, but accounts close on 31 March. The prepaid portion is:
Rs 6,000 (3 months)
Rs 12,000
Rs 24,000
Nil
Explanation: April–June (3 months) is prepaid: 24,000 × 3/12 = 6,000, shown as a current asset.
Question 7 of 10
Goods costing Rs 5,000 taken by the proprietor for personal use (not yet recorded) should be:
Deducted from purchases and added to drawings
Added to sales
Added to closing stock
Ignored
Explanation: It is drawings of goods: reduce purchases (goods left the business) and increase drawings (deducted from capital).
Question 8 of 10
Depreciation on machinery omitted by a student would make the net profit and the machinery figure:
Both overstated
Both understated
Profit understated only
Unaffected
Explanation: Missing the expense overstates profit, and the un-depreciated machine is overstated in the balance sheet.
Question 9 of 10
Commission earned Rs 8,000 but only Rs 6,000 received. The Rs 2,000 is treated as:
Accrued income — added to commission and shown as a current asset
Unearned income
An expense
A liability
Explanation: Income earned but not received is accrued income — added to the income and shown as a receivable asset.
Question 10 of 10
A balance sheet tallies only if every adjustment is:
Given its full double effect on the correct sides
Used once
Ignored
Added to capital
Explanation: Both effects of each adjustment, placed correctly, keep Assets = Liabilities + Capital.