PRC-1 · Chapter 4 · Question 100 of 100
A business incorrectly records an unearned revenue of Rs. 15,000 as accrued revenue. What is the double-impact of this specific error on the reported net profit?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Profit is overstated by Rs. 30,000
Explanation
Recording unearned revenue (liability) as accrued revenue (asset) inappropriately increases recognized income by 15k instead of deferring it (which would decrease recognized income by 15k). The total swing is an overstatement of Rs. 30,000.
More Accruals and Prepayments MCQs
- Q2'BlueSky Logistics' paid an annual insurance premium of Rs. 120,000 on 1 August. The company's financial year ends on 31 December. What…
- Q3At the start of the year, 'Prime Retailers' had an accrued electricity balance of Rs. 40,000. During the year, cash paid for electricity…
- Q4The fundamental matching concept in accounting primarily requires that a business matches:
- Q5An expense that has been incurred in the current accounting period but remains unpaid at the year-end is formally termed as an:
- Q6'Zenith Properties' received two years of rent amounting to Rs. 600,000 in advance on 1 April. If the financial year ends on 31 December…