Accounting Multiple Choice Question – 22 December 2019

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

During its first financial year, ended on 31 December 1995. a firm paid £3,000 in respect of insurance premiums.

All premiums were paid in advance and, except for the following related to policies with renewal dates similar to the firm’s accounting year-end date.

Policy X                               Policy Y

Annual premium                        £240                                     £1,200
Renewal date                               30 June 1996                      30 April 1996
Premium paid                             1 July 1995                          1 May 1995

The firm’s insurance expense for 1995 was:

Select ONE answer:

  1. £2,280
  2. £2,480
  3. £2,580
  4. £3,000

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 2

  1. Not correct
  2. Correct
    Year-end Prepayment
    Policy X = January to June 1996 = 6 months @ £240 pa. = £120
    Policy Y = January to April 1996 = 4 months @ £1,200 pa. = £400
    Total = £520
    Insurance Expense:
    Dr Bank £3,000
    Cr Profit and Loss £2,480
    Cr Balance c/d (above) £520
    Cr Totals £3000
  3. Not correct
  4. Not correct

 

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.

%d bloggers like this: