PRC-1 · Chapter 10 · Question 20 of 100
A business discovers an unpaid invoice for electricity amounting to Rs. 5,000 at the end of the year. How should this be recorded?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Debit Electricity Expense Rs. 5,000, Credit Accrued Expenses Rs. 5,000
Explanation
Under the accrual basis of accounting, expenses incurred but not yet paid must be recognized. This requires debiting the expense account and crediting a liability account (Accrued Expenses).
More Preparation of Financial Statements MCQs
- Q22Which of the following equations correctly defines 'Gross Profit'?
- Q23What is the primary purpose of the 'Statement of Changes in Equity'?
- Q24If an entity fails to record an adjusting entry for accrued wages at year-end, what is the effect on the financial statements?
- Q25Which of the following represents a 'Capital Expenditure'?
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