An unearned income is classified as: MCQ with Answer and Explanation

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An unearned income is classified as:

A. Liability

B. Expense

C. Income

D. Asset

Answer: Option A

Solution (By JKSSB Mock Tests)

Unearned income (advance received) represents obligation to render service, hence a liability.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

In cost accounting, 'Variable Cost' per unit:

A. Decreases with production

B. Remains constant

C. Increases with production

D. Fluctuates randomly

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Correct Answer: Option B

Explanation:
Variable cost per unit remains constant; total variable cost changes with output.

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Question #2

Which of the following is an accounting standard on 'Impairment of Assets'?

A. AS 10

B. AS 2

C. AS 28

D. AS 14

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Correct Answer: Option C

Explanation:
AS 28 deals with Impairment of Assets, ensuring assets are not carried at more than recoverable amount.

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Question #3

S1: Under Ind AS 109, financial assets are classified into three measurement categories: Amortized Cost, Fair Value Through Other Comprehensive Income (FVTOCI), and Fair Value Through Profit or Loss (FVTPL). S2: Equity investments are always measured at Amortized Cost. Which statement(s) is/are correct?

A. S2 only

B. Neither S1 nor S2

C. S1 only

D. Both S1 and S2

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Correct Answer: Option C

Explanation:
S1 is correct as per Ind AS 109. S2 is incorrect because equity investments do not have contractual cash flows that are solely payments of principal and interest (SPPI), so they cannot be measured at Amortized Cost; they are measured at FVTPL or FVTOCI.

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