The 'Prepaid Insurance' is adjusted by: MCQ with Answer and Explanation

The 'Prepaid Insurance' is adjusted by:
A. Debit Prepaid Insurance A/c, Credit Insurance A/c
B. Debit Cash A/c, Credit Insurance A/c
C. Ignore
D. Debit Insurance A/c, Credit Prepaid Insurance A/c
Answer: Option A
Solution (By JKSSB Mock Tests)
Prepaid insurance is an asset, so Prepaid Insurance A/c Dr. To Insurance A/c.

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Practice More Accountancy and Book Keeping Questions

Question #1
S1: The Purchases Return Book records returns of goods purchased on credit. S2: The Purchases Return Book is also called the Returns Outwards Book. Which statement(s) is/are correct?
A. S1 only
B. Neither S1 nor S2
C. Both S1 and S2
D. S2 only

Correct Answer: Option C


Explanation:
The Purchases Return Book records goods returned to suppliers that were originally purchased on credit. It is also known as the Returns Outwards Book because goods are going out of the business. Both statements are correct.

Question #2
Which of the following would cause a difference in Cash Book and Pass Book?
A. Bank charges debited by bank
B. Interest credited by bank
C. Direct deposit by a customer into bank
D. All of the above

Correct Answer: Option D


Explanation:
All these items may be recorded by bank but not yet by customer, causing timing differences.

Question #3
The 'Minimum Alternate Tax' (MAT) is applicable to:
A. Individuals
B. Partnership firms
C. Companies paying low or no tax due to exemptions
D. All taxpayers

Correct Answer: Option C


Explanation:
MAT ensures that companies with substantial book profits pay at least a minimum amount of tax.