In a journal entry, if an asset is destroyed by fire and fully insured, which account is debited? MCQ with Answer and Explanation

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In a journal entry, if an asset is destroyed by fire and fully insured, which account is debited?

A. Sales Account

B. Profit & Loss Account

C. Asset Account

D. Insurance Company (Claim) Account

Answer: Option D

Solution (By JKSSB Mock Tests)

Because the loss is fully insured, the insurance company becomes a debtor for the claim amount, hence debited.

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

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Question #1

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An unearned income (income received in advance) appears in the Balance Sheet as a:

A. Contingent Liability

B. Current Asset

C. Current Liability

D. Non-Current Liability

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Correct Answer: Option C

Explanation:
Income received before the service is provided creates an obligation to deliver the service, making it a current liability.

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Question #2

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Which accounting concept prevents the anticipation of profits but allows recognition of all losses?

A. Materiality concept

B. Realization concept

C. Consistency concept

D. Prudence (Conservatism) concept

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Correct Answer: Option D

Explanation:
Prudence concept states that one should not anticipate profits but provide for all possible losses.

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Question #3

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The Central Board of Direct Taxes (CBDT) functions under which department of the Ministry of Finance?

A. Department of Economic Affairs

B. Department of Financial Services

C. Department of Expenditure

D. Department of Revenue

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Correct Answer: Option D

Explanation:
CBDT handles direct tax administration and forms part of the Department of Revenue.

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