Online Test — Financial Statements with Adjustments — II
15 Questions • 15 min • Chapter MCQ
15:00
Question 1 of 15
Adjustments are needed mainly to satisfy the ____ concept.
Matching
Money measurement
Cost
Entity
Explanation: Matching/accrual requires each year to carry its own expenses and incomes.
Question 2 of 15
Every adjustment has a:
Single effect
Double effect
Triple effect
No effect
Explanation: Each adjustment appears in two places.
Question 3 of 15
An outstanding expense is added to the expense and shown as a:
Current asset
Current liability
Fixed asset
Income
Explanation: It is owed, so a current liability.
Question 4 of 15
A prepaid expense is shown as a:
Current liability
Current asset
Capital
Expense only
Explanation: Benefit receivable next year — a current asset.
Question 5 of 15
Accrued income (earned, not received) is shown as a:
Current asset
Current liability
Expense
Drawing
Explanation: It is receivable — a current asset (and added to income).
Question 6 of 15
Income received in advance is shown as a:
Current asset
Current liability
Fixed asset
Capital
Explanation: It is owed back/unearned — a current liability.
Question 7 of 15
Closing stock given in adjustments appears in the Trading Account on the:
Debit side
Credit side
Both sides
Neither
Explanation: Closing stock is on the credit side of the Trading Account.
Question 8 of 15
Depreciation in adjustments is charged to P&L and ____ the asset.
Added to
Deducted from
Equal to
Doubled in
Explanation: Depreciation is deducted from the asset in the balance sheet.
Question 9 of 15
Further bad debts are deducted from:
Creditors
Debtors
Cash
Capital
Explanation: Bad debts reduce debtors (and are charged to P&L).
Question 10 of 15
Provision for doubtful debts is created on debtors:
Before bad debts
After deducting further bad debts
On creditors
On stock
Explanation: The provision is on debtors remaining after bad debts.
Question 11 of 15
Debtors 1,00,000; further bad debts 4,000; provision 5%. Provision amount =
Rs 5,000
Rs 4,800
Rs 4,000
Rs 5,200
Explanation: 5% of (1,00,000 − 4,000) = 5% of 96,000 = 4,800.
Question 12 of 15
A trial-balance item is used ____ in the final accounts.
Once
Twice
Three times
Never
Explanation: Trial-balance items are used once; adjustments twice.
Question 13 of 15
Net profit in the balance sheet is:
Added to capital
Deducted from capital
A liability to outsiders
An asset
Explanation: Net profit is added to the owner's capital.
Question 14 of 15
Rent (TB) 10,000; outstanding rent 2,000. Amount charged to P&L:
Rs 8,000
Rs 12,000
Rs 10,000
Rs 2,000
Explanation: 10,000 + 2,000 outstanding = 12,000 charged to P&L.
Question 15 of 15
If the balance sheet does not tally, the likely cause is an adjustment:
Used twice correctly
Used once or on the wrong side
Ignored fully
Used four times
Explanation: A single-use or wrong-side adjustment breaks the agreement.