Accruals and Prepayments Quiz
11 multiple-choice questions with answers and explanations · 4 easy, 4 medium, 3 hard
Calculating the expense or income for the year from cash paid and opening and closing accruals and prepayments, and where each balance sits on the balance sheet.
- 1Accrual vs Prepayment: Which Is Which?At the year-end a business owes $300 for electricity it has already used, and has paid $600 for next year’s insurance. These are:easy
- 2Accrued Income on the Balance SheetRent of $700 has been earned from a tenant but has not been received at the year-end. On the landlord’s balance sheet this accrued income is:easy
- 3Cash Basis of Accounting: When Is an Expense Recorded?Under the CASH basis of accounting, an expense is recorded when:easy
- 4Accrued Revenue vs Unearned RevenueWhich phrase correctly describes ACCRUED revenue?easy
- 5Prepaid Rent Adjusting Entry: Calculating the Rent ExpenseOn 1 September a business pays $7,200 for 12 months’ rent and debits Prepaid Rent. Its year-end is 31 December. What is the rent expense for the year?medium
- 6Accruals: Calculating the Electricity Expense for the YearDuring the year a business paid $4,100 for electricity. It owed $350 at the start of the year and owes $500 at the end. What is the electricity expense for the year?medium
- 7Prepayments: Calculating the Insurance Expense for the YearInsurance premiums of $3,600 were paid during the year. Prepaid insurance was $400 at the start of the year and $700 at the end. What is the insurance expense for the year?medium
- 8Cash Basis vs Accrual Basis: Computing Accrual ProfitIn its first year a business received $50,000 cash from customers and is still owed $6,000 for work done. It paid $30,000 of expenses and still owes $2,000 of expenses. What is its profit on the ACCRUAL basis?medium
- 9Rent Expense with an Opening Prepayment and a Closing AccrualAt the start of the year rent of $1,000 was prepaid. During the year $10,500 of rent was paid, and at the end of the year $1,500 of rent is owing. What is the rent expense for the year?hard
- 10Rent Income with Opening Accrued Income and Closing Income in AdvanceA landlord was owed $800 of rent at the start of the year. During the year $9,600 was received from tenants, of which $1,200 relates to next year. What is rent income for the year?hard
- 11A Two-Year Insurance Policy: The Non-Current Part of the PrepaymentOn 1 April Year 1 a business pays $4,800 for a 24-month insurance policy. At 31 December Year 1, how much of the remaining prepayment is a NON-current asset?hard