Accounting Multiple Choice Question – 14 December 2019

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

The effect of the year-end adjustment required in respect of rates prepaid is . . .

Select ONE answer:

  1. to decrease the figures shown in the balance sheet for both creditors and prepayments.
  2. to decrease both the rates expense shown in the profit and loss account and the figure shown in the balance sheet for prepayments.
  3. to increase the figures shown in the balance sheet for both prepayments and creditors.
  4. to increase the figure shown in the balance sheet for prepayments and to decrease the rates expense shown in the profit and loss account.

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 4

  1. Not correct
  2. Not correct
  3. Not correct
  4. Correct – Prepayments, being money paid for benefits yet to be received, are assets. As they are amounts paid in respect of future accounting periods, the expense to be shown in the profit and loss account for a period will be less than the amount paid during that period, by the amount of the prepayment (an application of the accruals concept).

 

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