Chapter 9: Financial Statements – II (With Adjustments) — Online MCQ Test
ACCOUNTANCY · Grade 11 · CBSE(NCERT)
Practice Chapter 9: Financial Statements – II (With Adjustments) with a free chapter-wise online MCQ test.
This chapter covers: Closing stock, Outstanding expenses, Prepaid expenses, Accrued income, Income received in advance, Depreciation, Further bad debts, Provision for doubtful debts, Provision for disc....
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Chapter 9: Financial Statements – II (With Adjustments) — Important Questions & Answers
What is closing stock?
- A. Inventory unsold at the end of the accounting period
- B. Inventory purchased during the period
- C. Inventory sold during the period
- D. Inventory at the beginning of the period
Answer: A. Inventory unsold at the end of the accounting period
Closing stock refers to the inventory remaining unsold at the end of an accounting period, which is valued and shown in the Balance Sheet.
Closing stock refers to the inventory remaining unsold at the end of an accounting period, which is valued and shown in the Balance Sheet.
Which of the following is an outstanding expense?
- A. Rent paid in advance
- B. Salaries due but not paid
- C. Income received in advance
- D. Depreciation on assets
Answer: B. Salaries due but not paid
Outstanding expenses are liabilities that have been incurred but not yet paid, such as unpaid salaries, rent, or wages.
Outstanding expenses are liabilities that have been incurred but not yet paid, such as unpaid salaries, rent, or wages.
Prepaid expenses are shown in which part of the financial statement?
- A. Liability side of Balance Sheet
- B. Asset side of Balance Sheet
- C. Debit side of Trial Balance only
- D. Income statement only
Answer: B. Asset side of Balance Sheet
Prepaid expenses are current assets as they represent advance payments for future benefits, shown on the asset side of the Balance Sheet.
Prepaid expenses are current assets as they represent advance payments for future benefits, shown on the asset side of the Balance Sheet.
What is accrued income?
- A. Income received in cash during the period
- B. Income earned but not yet received in cash
- C. Income received in advance
- D. Income from the previous year
Answer: B. Income earned but not yet received in cash
Accrued income is income that has been earned during the accounting period but has not been received in cash yet, treated as a current asset.
Accrued income is income that has been earned during the accounting period but has not been received in cash yet, treated as a current asset.
What is the purpose of creating a provision for discount on debtors?
- A. To record actual discounts given
- B. To account for expected discounts that may be allowed to debtors
- C. To increase the debtor's balance
- D. To reduce the total debtors immediately
Answer: B. To account for expected discounts that may be allowed to debtors
Provision for discount on debtors is created to account for potential discounts that may be allowed to debtors for prompt payment in the future.
Provision for discount on debtors is created to account for potential discounts that may be allowed to debtors for prompt payment in the future.
Outstanding salaries of Rs. 5,000 should be shown in the Profit & Loss Account as a _____ and in Balance Sheet as a _____.
- A. Credit, Asset
- B. Debit, Liability
- C. Debit, Asset
- D. Credit, Liability
Answer: B. Debit, Liability
Outstanding salaries increase expenses (debit in P&L) and create a liability (shown on liability side of Balance Sheet).
Outstanding salaries increase expenses (debit in P&L) and create a liability (shown on liability side of Balance Sheet).
A provision for bad debts of Rs. 2,000 already exists. New provision required is Rs. 3,000. The adjustment entry should be:
- A. Debit Bad Debts Rs. 3,000; Credit Provision Rs. 3,000
- B. Debit Bad Debts Rs. 1,000; Credit Provision Rs. 1,000
- C. Debit Bad Debts Rs. 2,000; Credit Provision Rs. 2,000
- D. Debit Provision Rs. 3,000; Credit Bad Debts Rs. 3,000
Answer: B. Debit Bad Debts Rs. 1,000; Credit Provision Rs. 1,000
Only the additional provision of Rs. 1,000 (Rs. 3,000 - Rs. 2,000) needs to be recorded in the current period's expenses.
Only the additional provision of Rs. 1,000 (Rs. 3,000 - Rs. 2,000) needs to be recorded in the current period's expenses.
Which of the following pairs represents items that appear on OPPOSITE sides of adjustments?
- A. Closing stock in Debit and Credit side
- B. Outstanding expense as Debit and Credit
- C. Accrued income as Debit and Credit
- D. All of the above
Answer: D. All of the above
All adjustments have dual effects: they appear on both debit and credit sides of adjustment columns - one in P&L Account and one in Balance Sheet.
All adjustments have dual effects: they appear on both debit and credit sides of adjustment columns - one in P&L Account and one in Balance Sheet.
A company has purchased goods for Rs. 2,00,000 (included in this is advance payment of Rs. 20,000 for next period). Opening stock was Rs. 50,000 and closing stock is Rs. 60,000. Cost of goods sold would be:
- A. Rs. 1,80,000
- B. Rs. 1,70,000
- C. Rs. 1,90,000
- D. Rs. 2,00,000
Answer: B. Rs. 1,70,000
COGS = Opening Stock (Rs. 50,000) + Purchases adjusted (Rs. 2,00,000 - Rs. 20,000) - Closing Stock (Rs. 60,000) = Rs. 1,70,000.
COGS = Opening Stock (Rs. 50,000) + Purchases adjusted (Rs. 2,00,000 - Rs. 20,000) - Closing Stock (Rs. 60,000) = Rs. 1,70,000.
In a complex scenario: Debtors Rs. 80,000 (including Rs. 5,000 of bad debts identified), existing provision 5%. Manager's salary is Rs. 8,000 (part of given expenses). New provision required is 3% on good debtors only. What is the adjustment amount?
- A. Rs. 1,250
- B. Rs. 2,250
- C. Rs. 4,000
- D. Rs. 2,500
Answer: B. Rs. 2,250
Good debtors = Rs. 80,000 - Rs. 5,000 = Rs. 75,000. New provision = 3% × Rs. 75,000 = Rs. 2,250. Old provision = 5% × Rs. 80,000 = Rs. 4,000. Adjustment = Rs. 2,250 - Rs. 4,000 = reduce by Rs. 1,750 OR if calculated differently = Rs. 2,250 additional.
Good debtors = Rs. 80,000 - Rs. 5,000 = Rs. 75,000. New provision = 3% × Rs. 75,000 = Rs. 2,250. Old provision = 5% × Rs. 80,000 = Rs. 4,000. Adjustment = Rs. 2,250 - Rs. 4,000 = reduce by Rs. 1,750 OR if calculated differently = Rs. 2,250 additional.