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Question 1. The purpose of adjustments is ___

 
  1.     to assign appropriate portion of revenue and expenses to the appropriate accounting period.
  2.     to make sure that revenue is recognised in the period in which it is earned and expenses are recognised in the period in which they are incurred.
  3.     to update the accounts to confirm with the accrual concept.
  4.     All of the above
Answer: Option D
: D

All of the above are the purpose of doing adjustements in financial statements.

Question 2. Rent has been paid on 1st January 2018 for a period of 6 months amounting to Rs 60,000 @ 10,000 per month. By what amount shall the prepaid expenses account be debited, while passing the adjustment entry?
  1.    It shall be debited by Rs 10,000
  2.    It shall be debited by Rs 30,000
  3.     It shall not be debited
  4.    It shall be debited by Rs 20,000
Answer: Option B
: B

It shall be debited by Rs 30,000 for the period of 3 months(April to June).

Question 3. Which account is debited while passing the adjustment entry for outstanding expenses?
  1.     Outstanding expense account
  2.    Prepaid expense account
  3.     Expense account
  4.    None of the above
Answer: Option C
: C

The correct adjusting entry is ExpenseA/cDr
To Outstanding expenseA/c