Accounting Multiple Choice Question – 13 December 2019

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

Accounting

Expenses relevant to an accounting period which remain unpaid at the end of the period should . . .

Select ONE answer:

  1. be shown as an expense in the profit and loss account for the period and shown as a current liability in the balance sheet at the end of the period.
  2. be shown as an asset in the balance sheet at the end of the period and shown as income in the profit and loss account for the period.
  3. be shown as part of long-term liabilities in the balance sheet at the end of the period.
  4. be netted off against prepayments on the same date and shown together, as a single figure, in the balance sheet at the end of the period.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

  1. Correct – Accruals. being amounts due. are a liability. As they are amounts due in respect of expenses, they must be shown as expenses in the profit and loss account.
  2. Not correct – Expenses should clearly not be shown as income in the profit and loss account and amounts due but unpaid should clearly be shown as a liability in the balance sheet.
  3. Not correct – Expenses due but unpaid are likely to be payable within a year of the balance sheet date. They should, therefore, be shown as current liabilities. not long-term liabilities (amounts payable after more than one year from the balance sheet date).
  4. Not correct – Assets (prepayments) and liabilities (accruals) should always be shown separately in the balance sheet rather than being netted off against each other as this provides better (more complete) information.

 

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Author: stuart001uk2014

Referral marketing, business, economics and accounting s​pecialist & corporate mentor

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