Quiz on Adjustments for Accruals and Prepayments Eagle

What is a prepaid expense?

• An expense that has been incurred but not paid

• An expense that is not recorded in the financial statements

• An expense paid in advance for future periods

• An expense that is recorded as a liability

How should prepaid expenses be treated in the Statement of Financial Position (SOFP)?

• As a current liability

• As a current asset

• As a long-term asset

• As an operating expense

What is an accrued expense?

• An expense that is recorded as a revenue

• An expense that is not recognized in the accounting period

• An expense incurred but not yet paid

• An expense that has been paid in advance

Which of the following is an example of an accrued expense?

• Insurance premium paid in advance

• Subscription fees paid in advance

• Rent owed but not yet paid

• Utility bills paid in advance

What is prepaid revenue?

• Revenue received for goods or services to be provided in the future

• Revenue that is recorded as a current asset

• Revenue earned but not yet received

• Revenue that has been recognized in the current period

How should accrued revenue be treated in the Statement of Financial Position (SOFP)?

• As a current asset

• As a current liability

• As an operating expense

• As a long-term liability

In the example of ABC Trading's insurance policy, what is the total insurance expense for the period ending 31 December 20X2?

• RM 600

• RM 350

• RM 50

• RM 200

What entry is made to record accrued rent expense on 31 December 20X2?

• Dr Rent Expense, Cr Accrued Rent Expense

• Dr Accrued Rent Expense, Cr Rent Expense

• Dr Bank, Cr Rent Expense

• Dr Rent Expense, Cr Bank

Which of the following is true about prepaid expenses?

• They are deducted from the respective expense account

• They are recorded as current liabilities

• They are not recorded in the financial statements

• They are recognized as income in the current period