Understanding financial Statements

This set of MCQs helps students to learn about various important things such as, describe the need for adjustments while preparing the financial statements, explain the accounting treatment of adjustments for outstanding and prepaid expenses, accrued and advance receipts of incomes, discuss the adjustments to be made regarding depreciation, bad debts, provision for doubtful debts, provision for discount on debtors, explain the concepts and adjustment of manager’s commission and interest on capital, prepare profit and loss account and balance sheet with adjustments.

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Prepaid expenses are shown in-

Liability side Asset side Assets or Liability side None of these.

Charity of goods is-

Expenses Loss Profit None of these.

If a person fails to pay his debt, such amount is considered as-

Bad debts Bad debts recovered Provision for Bad debt None of these.

The object of non – trading concerns-

Social service Profit earning Both of these None of the above.

Such persons who earn remuneration against their services are called –

Seller Purchaser Professional None of these.

Receipt and payment account is a summary of-