MCQs of Adjustments in Preparation of Financial Statements Class 11 with Answers
MCQs of Adjustments in Preparation of Financial Statements Class 11 with Answers for CBSE, ISC and State Boards
If ‘Prepaid Wages’ is given in Trial Balance, it is shown in:
(a) Debit of Trading A/c
(b) Debit of Trading A/c and Assets
(c) Debit of P & L A/c
(d) Assets
Ans – (d)
Adjustments given are recorded once in Trading and Profit & Loss Account and again in Balance Sheet. It is so because of:
(a) Matching Principle
(b) Dual Aspect Principle
(c) Accrual Concept
(d) Materiality Principle
Ans – (b)
Outstanding Salary is:
(a) Real Account
(b) Personal Account
(c) Nominal Account
(d) None of these
Ans – (b)
Expenses incurred but not yet paid are accounted because of:
(a) Matching Principle
(b) Dual Aspect Principle
(c) Accrual Concept
(d) Materiality Principle
Ans – (c)
If the manager is entitled to a commission of 5% on profits before deducting his commission, he will get a commission of ₹ __ on a profit of ₹ 8,400.
(a) 400
(b) 442
(c) 420
(d) None of the above
Ans – (c)
Wages paid for installation of machine is added to the cost of machine because of
(a) Accrual Concept
(b) Matching Principle
(c) Materiality Principle
(d) Const Principle
Ans – (d)
Trial Balance contains the following information:
15% Bank Loan – ₹ 40,000
Interest Paid – ₹ 4,500
Interest debited to P & L A/c will be:
(a) ₹ 6,000
(b) ₹ 3,000
(c) ₹ 4,500
(d) ₹ 1,500
Ans – (a)
In the Trial Balance are shown Debtors ₹ 2,400, Bad Debts ₹ 221, Bad Debts Provision ₹ 324. For creating a Provision for Doubtful Debts @ 10% on debtors, the P & L A/c will be debited by:
(a) 137
(b) 240
(c) 343
(d) 9
Ans – (a)
Prepaid Insurance in the Rial Balance is shown in the Balance Sheet in the assets side because of:
(a) Accrual Concept
(b) Matching Principle
(c) Materiality Principle
(d) Cost Principle
Ans – (a)
A’s Trial Balance provides you the following information:
Bad Debts – ₹ 3,000
Provision for Bad Debts – ₹ 5,000
It is desired to maintain a provision of ₹ 1,500 for doubtful debts, the amount to be recorded in P & L A/c will be:
(a) ₹ 4,500 in Dr.
(b) ₹ 500 in Cr.
(c) ₹ 500 in Dr.
(d) ₹ 3,500 in Dr.
Ans – (b)
Sundry Debtors given in the Trial Balance are ₹ 20,000. Further bad debts amounted to ₹ 1,000 and it is desired to create a provision of 5% on debtors for doubtful debts and 2% for discount. Sundry Debtors will appear in the Balance Sheet at a figure of:
(a) ₹ 18,620
(b) ₹ 18,600
(c) ₹ 17,689
(d) ₹ 17,670
Ans – (c)
On 1st February, 2025, a loan of ₹ 1,00,000 was given to Parth @ 12% p.a. Interest was received for 3 months from February 2025 to April, 2025. In the financial statements for the year ended 31st March, 2025, amount of advance interest will be
(a) ₹ 1,200
(b) ₹ 1,000
(c) ₹ 3,600
(d) ₹ 4,800
Ans – (b)
A trial balance contains Debtors ₹ 15,000, Bad Debts ₹ 400 and Provision for Doubtful Debts ₹ 600. Further bad debts given in adjustments are ₹ 400. If a provision at 5% is made on Debtors, P & L A/c will be debited with:
(a) ₹ 950
(b) ₹ 800
(c) ₹ 930
(d) ₹ 1,130
Ans – (c)
Income earned but not received is shown in:
(a) Liabilities
(b) Assets
(c) Foot Notes
(d) None of them
Ans – (b)
Indirect Expenses are transferred to:
(a) Trading Account
(b) Profit & Loss Account
(c) Balance Sheet
(d) Trading Account and Balance Sheet
Ans – (b)
Bills Receivable discounted but not due till the date of final accounts is shown in:
(a) P & L A/c
(b) Assets
(c) Liabilities
(d) Foot Notes
Ans – (d)
A new firm commenced business on 1st April, 2022 and purchased goods costing ₹ 90,000 during the year. A sum of ₹ 6,000 was spent on freight inward. At the end of the year (on 31st March, 2023) the cost of goods still unsold was ₹ 15,000 (Realisable Value 12,000). Sales during the year was ₹ 1,20,000. What is the gross profit earned by the firm?
(a) ₹ 42,000
(b) ₹ 30,000
(c) ₹ 36,000
(d) ₹ 39,000
Ans – (c)
Wages and Salaries Account is shown in the
(a) Trading Account
(b) Profit & Loss Account
(c) Balance Sheet
(d) Trading Account and Balance Sheet
Ans – (a)
Income tax paid by a sole trader is reflected in his financial statements:
(a) On the debit side of the Trading Account
(b) On the debit side of the Profit and Loss Account
(c) As an asset in the Balance Sheet
(d) As way of deduction from capital in the Balance Sheet
Ans – (d)
Insurance paid ₹ 16,000 (including premium of ₹ 12,000 per annum paid upto 30th June, 2023). what will be the adjusting closing entry necessary as on 31st March, 2022:
(a)
Insurance Prepaid A/c Dr. 3,000
To Insurance A/c 3,000
(b)
Insurance A/c Dr. 3,000
To Insurance Prepaid A/c 3,000
(c)
Insurance Prepaid A/c Dr. 4,000
To Insurance A/c 4,000
(d)
Insurance Prepaid A/c Dr. 1,000
To Insurance A/c 1,000
Ans – (a)
Salaries and Wages Account is shown in
(a) Trading Account
(b) Profit & Loss Account
(c) Balance Sheet
(d) Trading Account and Balance Sheet
Ans – (b)
Which of the following statements is correct:
(a) King’s International – P & L A/c as on 31st March, 2023
(b) King’s International – P & L A/c for the year ended 31st March
(c) King’s International – P & L A/c for the year ended 31st March, 2023
(d) King’s International – P & L A/c for the current year (2022-2023)
Ans – (c)
Rent paid on 1st October, 2021 for one year upto 30th September, 2022 was ₹ 2,400. Rent paid on 1st October, 2022 for the year upto 30th September, 2023 was ₹ 3,200. Rent shown in the Profit and Loss Account for the year ended on 31st December, 2022, would be:
(a) ₹ 6,000
(b) ₹ 3,200
(c) ₹ 3,000
(d) ₹ 2,600
Ans – (d)
Closing Stock is valued at
(a) Cost
(b) Net Realisable Value (Market Value)
(c) Cost or Net Realisable Value (Market Value), whichever is more
(d) Cost or Net Realisable Value, whichever is less
Ans – (d)
Closing Stock is valued at Cost or Net Realisable Value (Market Value), whichever is less because of
(a) Going Concern Concept
(b) Accrual Concept
(c) Prudence or Conservatism Concept
(d) Consistency Concept
Ans – (c)
Accrued income is:
(a) A Liability
(b) Revenue
(c) An Asset
(d) An Expense
Ans – (c)
If closing stock appears in Trial Balance then it will be appearing in:
(a) Trading Account
(b) Balance Sheet
(c) Profit & Loss Account
(d) Trading A/c & Balance Sheet
Ans – (b)
Closing Stock, if given outside the Trial Balance, is shown in
(a) Trading Account and Balance Sheet
(b) Profit & Loss Account
(c) Profit & Loss Account and Balance Sheet
(d) Balance Sheet
Ans – (a)
Types of Account shown in Balance Sheet are ________ .
(a) Nominal and Personal
(b) Real and Nominal
(c) Real and Personal
(d) Real, Nominal and Personal
Ans – (c)
Following information is given in Trial Balance
Bad Debt – ₹ 3,000
Provision for Bad Debts – ₹ 3,500
Debtors – ₹ 40,000
Additional Information:
It is desired to made a provision for doubtful debts @ of 10% on debtors. The amount debited to P&L A/c is
(a) ₹ 4,000
(b) ₹ 5,000
(c) ₹ 6,500
(d) ₹ 3,500
Ans – (d)
If Closing Stock is given in the Trial Balance, it will be shown in the
(a) Trading Account
(b) Profit & Loss Account
(c) Trading Account and Balance sheet
(d) Balance Sheet
Ans – (d)
Following information is taken from the Trial Balance of an enterprise:
Sales: ₹ 1,00,000; Purchase: ₹ 60,000; Wages ₹ 7,000.
Closing Stock was ₹ 3,000 more than opening stock. What was the Gross Profit?
(a) ₹ 30,000
(b) ₹ 33,000
(c) ₹ 36,000
(d) ₹ 40,000
Ans – (c)
Net Profit before the following adjustments: ₹ 1,80,000
Outstanding salary – ₹ 10,000
Prepaid Insurance – ₹ 13,000
Calculate profit after adjustment:
(a) ₹ 1,83,000
(b) ₹ 1,77,000
(c) ₹ 2,03,000
(d) ₹ 1,87,000
Ans – (a)
Net Profit of a firm before charging manager’s commission is ₹ 21,000. If the manager is entitled to 5% commission after charging such commission, how much manager will get as commission?
(a) ₹ 1,050
(b) ₹ 1,000
(c) ₹ 2,100
(d) ₹ 2,000
Ans – (b)
Prepaid Expenses, if given in the Trial Balance, is shown in
(a) Trading Account, as deduction from the respective expense
(b) Profit & Loss Account, as deduction from the respective expense
(c) Trading and Profit & Loss Account, as deduction from the respective expense and in the Balance Sheet, as an asset
(d) Balance Sheet
Ans – (d)
Income Received in advance, if given in the Trial Balance, is shown in
(a) Trading Account, as deduction from the respective income
(b) Profit & Loss Account, as deduction from the respective income
(c) Profit & Loss Account, as deduction from the respective income and in the liabilities side of the Balance Sheet
(d) Balance Sheet
Ans – (d)
Closing stock is shown in Financial Statements at:
(a) Cost Price
(b) Realisable Value
(c) Cost price or Realisable Value whichever is greater
(d) Cost price or Realisable Value whichever is less
Ans – (d)
General Manager gets 10% commission on net profit after charging such commission. Gross Profit ₹ 2,00,000; Wages ₹ 22,000; Salaries ₹ 15,000; Manager’s Commission will be:
(a) ₹ 12,500
(b) ₹ 13,000
(c) ₹ 14,000
(d) ₹ 16,000
Ans – (d)
Income received in advance is deducted from the income because of
(a) Revenue Recognition Concept
(b) Accrual Concept
(c) Matching Concept
(d) Prudence Concept
Ans – (b)
Adjustment to be made for Prepaid Expenses is:
(a) Deduct Prepaid Expenses from respective expenses and show it as a liability
(b) Add Prepaid Expenses to respective expenses and show it as a liability
(c) Add Prepaid Expenses to respective expenses and show it as an asset
(d) Deduct Prepaid Expenses from respective expenses and show it as an Asset
Ans – (d)
Heavy amount spent for the advertisement of new company product is
(a) Revenue Expenditure
(b) Deferred Revenue Expenditure
(c) Capital Expenditure
(d) Either (A) or (C)
Ans – (b)
Income tax in case of sole trader is treated as
(a) Personal Expenses
(b) Debtors Expenses
(c) Business Expenses
(d) None of the above
Ans – (a)
Balance Sheet is prepared to know
(a) financial performance
(b) financial position
(c) liabilities position
(d) assets position
Ans – (b)
Business paid to Mr. A ₹ 50,000 as salary on 25th March, 2023. Mr. A went to bank to deposit cheque in his account on 3rd April, 2023. What is the entry to be passed while preparing the Balance sheet as at 31st March 2023.
(a) No Entry
(b) Bank A/c Dr. To O/s Salary A/c
(c) O/s Salary A/c Dr. To Bank A/c
(d) Salary A/c Dr. To O/s Salary A/c
Ans – (a)
A machine was purchased in Bihar. During transit the machine was damaged and the cost of repairs incurred is ₹ 20,000. This expense is treated as:
(a) Capital Expense
(b) Revenue Expense
(c) Deferred Revenue Expense
(d) None of these
Ans – (a)
Adjustment entries are those which are passed
(a) In the middle of the year
(b) At the beginning of the year
(c) For adjustment of prepaid and outstanding Expenses/Income
(d) For increasing Profit
Ans – (c)
Following particulars are given in Trial Balance:
Purchases ₹ 1,10,000; Sales ₹ 2,00,000; Wages ₹ 30,000; Closing Stock was ₹ 8,000 more than the Opening Stock. Two-third of the Wages was charged to the Cost of goods sold in Trading Account. Gross Profit was:
(a) ₹ 62,000
(b) ₹ 78,000
(c) ₹ 88,000
(d) ₹ 68,000
Ans – (b)
Closing Stock was shown at ₹ 49,500 while preparing the final accounts. Later on it was discovered that it was overvalued by 10%. What was the effect on Current Year’s profit?
(a) Decrease in gross profit and net profit by ₹ 4,500
(b) Decrease in gross profit and net profit by ₹ 5,500
(c) Increase in gross profit and net profit by ₹ 4,500
(d) Increase in gross profit and net profit by ₹ 4,950
Ans – (c)
The correct sequence for preparation of Final Accounts is:
- Preparation of Trial Balance
- Balancing of Accounts
- Preparation of Annual Financial Statements
- Passing Adjusting entries
Select the correct answer from the code given below:
(a) 4, 2, 1, 3
(b) 2, 4, 3, 1
(c) 2, 1, 4, 3
(d) 4, 2, 3, 1
Ans – (c)
Depreciation for current year in the Trial Balance is
(a) transferred to the Debit of Profit & Loss Account and it is deducted from that particular asset in the Balance Sheet.
(b) Shown in the Assets side of Balance Sheet as a deduction from the particular Asset.
(c) transferred to the Debit of Profit & Loss Account
(d) transferred to the Debit side of Trading Account
Ans – (c)
Which of the following is correct?
(a) Gross Profit + Sales + Net Purchases = Net Profit
(b) Gross Profit + Net Purchases + Administrative and other Expenses = Net Profit
(c) Gross Profit + Sales + Administrative and Other Expenses = Net Profit
(d) Gross Profit – Administrative, Selling and Other Expenses = Net Profit
Ans – (d)
Provision for Doubtful Debts, in excess of the required provision, is credited to
(a) Debtors Account
(b) Trading Account
(c) Profit & Loss Account
(d) Capital Account
Ans – (c)
Debts that were earlier written off, if recovered, are transferred to the credit side of
(a) Debtors Account
(b) Trading Account
(c) Profit & Loss Account
(d) Provision for Doubtful Debts Account
Ans – (c)
The effect of overvaluing Closing Stock on the Current Year’s Profit is
(a) Decreases the gross profit but decreases the net profit
(b) Increases the gross profit and increases the net profit
(c) Decreases the gross profit and increases net profit
(d) Increases the gross profit and net profit
Ans – (d)
Vijay’s Trial Balance has the following information:
Bad Debts ₹ 4,000; Provision for Doubtful Debts ₹ 5,000; Sundry Debtors ₹ 25,000. It is decided to maintain provision for doubtful debts at 10% on Sundry Debtors at the end of the year.
Sundry Debtors will be shown in the Balance Sheet at
(a) ₹ 22,500
(b) ₹ 21,000
(c) ₹ 18,000
(d) ₹ 15,500
Ans – (a)
Sanjay’s Trial Balance gives the following information:
Bad Debts ₹ 800; Provision for Doubtful Debts ₹ 2,000. It is decided to maintain a Provision for Doubtful Debts of ₹ 1,000.
The accounting treatment of these adjustment is:
(a) ₹ 1,800 to be transferred to the debit of Profit & Loss Account
(b) ₹ 200 to be transferred to the credit of Profit & Loss Account
(c) ₹ 200 to be transferred to the debit of Profit & Loss Account
(d) ₹ 3,800 to be transferred to the debit of Profit & Loss Account
Ans – (c)
Trial Balance shows Provision for Depreciation ₹ 5,000; Machinery ₹ 15,000. If depreciation is provided @ 25% on the Written down value of machinery, the amount of depreciation transferred to the debit of Profit & Loss Account is
(a) ₹ 7,500 (Dr.)
(b) ₹ 3,750 (Dr.)
(c) ₹ 2,500 (Dr.)
(d) ₹ 5,000 (Dr.)
(c)
Accumulated depreciation of a fixed asset is shown as
(a) an expense in the Profit & Loss Account
(b) a Liability in the Balance Sheet
(c) a deduction from the related fixed asset in the Balance Sheet
(d) an asset in the Balance Sheet
Ans – (c)
At the beginning of the financial year, Mohan had prepaid telephone expenses of ₹ 4,900. During the year, he paid telephone bills of ₹ 45,690. At the end of the year, he had outstanding expenses of ₹ 2,700.
Telephone expenses for the year to be charged to Profit & Loss Account are
(a) ₹ 38,000
(b) ₹ 43,490
(c) ₹ 47,890
(d) ₹ 53,290
Ans – (d)
A firm had opening debit balance in Advance Rent Account of ₹ 3,000. During the year, it paid rent of ₹ 15,000 and had credit balance of ₹ 2,000. Amount transferred to the debit of Profit & Loss Account will be
(a) ₹ 20,000
(b) ₹ 18,000
(c) ₹ 17,000
(d) ₹ 15,000
Ans – (a)
