Other Payables And Other Receivables (Copy)
Topic 4.3: Other Payables and Other Receivables – Quiz
O Level and IGCSE Accounting
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
1. What is the purpose of adjusting entries for accruals and prepayments?
A. To delay payments
B. To prepare bank statements
C. To match income and expenses in the correct period
D. To avoid taxation
2. An accrued expense is one that:
A. Has been paid in advance
B. Is paid in full during the year
C. Is outstanding at year-end
D. Is paid by customer
3. Which of the following is a prepaid expense?
A. Electricity bill due
B. Rent paid for next year
C. Loan taken from bank
D. Sales revenue
4. An accrued income is:
A. Income received before it is earned
B. Income earned but not yet received
C. Donation from the owner
D. A loan
5. A prepaid expense appears as:
A. Income in the profit and loss
B. Asset in the statement of financial position
C. Liability in the statement of financial position
D. Deduction from revenue
6. An accrued expense appears as:
A. An asset
B. An addition to profit
C. A liability
D. A prepaid item
7. A business pays insurance of $3,000 for the next 12 months. At year-end, 3 months have been used. What is the prepaid amount?
A. $750
B. $1,500
C. $2,250
D. $3,000
8. An income of $800 is earned but not received by year-end. What is the adjusting entry?
A. Dr Bank $800, Cr Income
B. Dr Accrued Income $800, Cr Income
C. Dr Income $800, Cr Bank
D. Dr Income $800, Cr Accrued Income
9. What is the journal entry to record an accrued expense?
A. Dr Expense, Cr Accrued Expense
B. Dr Accrued Expense, Cr Expense
C. Dr Prepaid Expense, Cr Bank
D. Dr Bank, Cr Expense
10. How does a prepaid income affect the final accounts?
A. Increases expense
B. Decreases expense
C. Decreases income
D. Increases profit
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
11. Rent income of $4,000 includes $1,000 for next year. What is the rent income for the current year?
A. $3,000
B. $4,000
C. $1,000
D. $0
12. Accrued expense is shown in which section of the financial statements?
A. Current assets
B. Current liabilities
C. Non-current liabilities
D. Equity
13. What type of account is “accrued income”?
A. Expense
B. Asset
C. Liability
D. Income
14. Which of the following represents a matching principle?
A. Recording transactions when cash is received
B. Recognising revenue in cash terms only
C. Matching expenses with related revenue
D. Ignoring outstanding payments
15. Prepaid expense should be:
A. Debited in the expense account
B. Deducted from the income statement
C. Shown under non-current assets
D. Added to liabilities
16. An accrued electricity bill should be:
A. Debited to electricity expense, credited to bank
B. Debited to electricity expense, credited to accrued expense
C. Debited to bank, credited to accrued expense
D. Ignored
17. A business receives $2,000 in advance for services next year. How is this treated?
A. Dr Income, Cr Bank
B. Dr Bank, Cr Prepaid Income
C. Dr Prepaid Income, Cr Income
D. Dr Bank, Cr Income
18. What is the effect of ignoring accrued income in final accounts?
A. Income will be overstated
B. Expense will be understated
C. Income will be understated
D. Net profit increases
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
19. An income received in advance is recorded as:
A. An asset
B. A liability
C. An income
D. An expense
20. Which of the following entries correctly adjusts for prepaid rent expense?
A. Dr Prepaid Expense, Cr Rent Expense
B. Dr Rent Expense, Cr Prepaid Expense
C. Dr Bank, Cr Prepaid Expense
D. Dr Expense, Cr Income
21. Which account is affected when rent expense is accrued?
A. Rent income
B. Rent expense
C. Prepaid rent
D. Sales
22. Which of these increases net profit?
A. Accrued expense
B. Prepaid income
C. Accrued income
D. Bank overdraft
23. Income earned but not yet received is a(n):
A. Prepaid income
B. Accrued income
C. Deferred income
D. Unearned income
24. Which of the following affects both the income statement and the statement of financial position?
A. Paid utility bill
B. Loan repayment
C. Accrued income
D. Depreciation
25. What is the year-end adjustment for $600 insurance prepaid?
A. Dr Insurance Expense $600, Cr Bank
B. Dr Prepaid Insurance $600, Cr Insurance Expense
C. Dr Insurance Expense $600, Cr Prepaid Insurance
D. No adjustment
26. A prepaid income reduces:
A. Expense
B. Profit
C. Revenue in the income statement
D. Capital
27. Accrued expenses are classified as:
A. Non-current liabilities
B. Current assets
C. Current liabilities
D. Prepayments
28. If accrued expense is omitted:
A. Profit is understated
B. Profit is overstated
C. Assets are understated
D. Liabilities are overstated
29. Journal entry for prepaid insurance would include:
A. Dr Bank
B. Cr Expense
C. Dr Prepaid Insurance
D. Cr Income
30. Which principle is being followed when adjusting for accrued and prepaid items?
A. Consistency
B. Prudence
C. Going concern
D. Matching
Answer key and explanations
Topic 4.3 – Other Payables and Other Receivables
O Level and IGCSE Accounting
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
1. Correct Answer: C
Explanation: Adjusting for accruals and prepayments ensures expenses and incomes are recorded in the correct accounting period, following the matching principle.
2. Correct Answer: C
Explanation: Accrued expenses are those incurred but not yet paid by the end of the accounting period.
3. Correct Answer: B
Explanation: A prepaid expense is a payment made for a future period—rent paid in advance is a classic example.
4. Correct Answer: B
Explanation: Accrued income is income that has been earned but not yet received by the period end.
5. Correct Answer: B
Explanation: Prepaid expenses are considered current assets since they provide future economic benefit.
6. Correct Answer: C
Explanation: Accrued expenses are current liabilities as they are obligations owed at the reporting date.
7. Correct Answer: C
Explanation: 9 months are unused → (9/12) × 3000 = 2250 prepaid.
8. Correct Answer: B
Explanation: Accrued income is recorded by debiting the accrued income account and crediting the income account.
9. Correct Answer: A
Explanation: Accrued expense: Debit the expense account to recognize the cost, credit the accrued expense liability.
10. Correct Answer: C
Explanation: Prepaid income (income received in advance) reduces the current period’s income.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
11. Correct Answer: A
Explanation: Only $3,000 relates to the current year; $1,000 is for next year and treated as liability.
12. Correct Answer: B
Explanation: Accrued expenses are current liabilities as they are due within one year.
13. Correct Answer: B
Explanation: Accrued income is a current asset as it’s money owed to the business.
14. Correct Answer: C
Explanation: The matching principle ensures that expenses incurred to earn revenues are recorded in the same period.
15. Correct Answer: A
Explanation: To record a prepaid expense, we debit Prepaid Expense (asset) and credit the Expense account to reduce it.
16. Correct Answer: B
Explanation: Expense is recorded, and a liability (Accrued Electricity) is credited as it’s still payable.
17. Correct Answer: B
Explanation: Bank is debited (receipt), and Prepaid Income is credited to show income received in advance.
18. Correct Answer: C
Explanation: If accrued income is not recorded, income and profit will be understated.
19. Correct Answer: B
Explanation: Income received in advance is a liability because it relates to the next period.
20. Correct Answer: A
Explanation: To adjust for a prepaid expense, reduce the expense and record the prepayment as an asset.
21. Correct Answer: B
Explanation: The expense is increased by debiting it to reflect the amount incurred.
22. Correct Answer: C
Explanation: Accrued income adds to total income → increases profit.
23. Correct Answer: B
Explanation: Income earned but not received is accrued income—an asset.
24. Correct Answer: C
Explanation: Accrued income affects the income statement (increases income) and the SOFP (as an asset).
25. Correct Answer: B
Explanation: Prepaid insurance is recorded as an asset: Dr Prepaid Insurance, Cr Insurance Expense.
26. Correct Answer: C
Explanation: Since it’s not yet earned, it reduces the income shown in the profit and loss.
27. Correct Answer: C
Explanation: Accrued expenses are classified as current liabilities—they’re amounts payable soon.
28. Correct Answer: B
Explanation: Omitting an accrued expense understates expenses → overstates profit.
29. Correct Answer: C
Explanation: To record a prepaid expense, Dr Prepaid Insurance (asset).
30. Correct Answer: D
Explanation: The matching principle ensures correct association of revenues with their respective expenses.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course