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Multiple Choice Question | Which Of The Following Items May Appear In A Balance Sheet? Brief Explanation With Reason: The correct answer is (c) as Capital, Drawings and Net Income are Balance Sheet Accounts while Revenue or Income and Expenses are Income Statement Accounts . So, all other options i.e., (a), (b) and (d) are incorrect. Capital is the amount which business owner invested into the business to start it or to further expand it. It is a permanent account so it is recorded on balance sheet as a claim against the assets of the business. Drawings are the withdrawal of cash or goods by the owner of the business for his own personal use. It is a Contra Equity Account as it reduces the owner's equity account and it is recorded on balance sheet on basis of separate business entity concept i.e., all the business matters are separated from the personal matters of the owner of the business and transactions are recorded from the points view of business and not from owner or o...

Multiple Choice Question Answer | Which Of The Following Does Not Reduce The Balance In Accounts Receivable? Reason: The correct answer is (c) "Recognizing bad debts expense", as the journal entry for recognizing bad debts expense is resulted in a debit to Bad Debt Expense Account Or Doubtful Debts Account Or Uncollectible Accounts Expense Account and a credit to Allowance for Bad Debts Account Or Allowance for Doubtful Account Or Provision for Doubtful Debts Account . It is just an estimation that a percentage of sales or accounts receivable may not be recovered from customers in future. So, it does not affect Accounts Receivable / Sundry Debtors . Accounts receivable account is only reduced when there is Actual Bad Debt Expense Or Bad Debts Written Off which means some of the debts due from customers are not paid to the company. So, it decreases the accounts receivable account / sundry debtors account. When actual bad debts are occurred, the journal entry to record is t...

True / False Question Answer With Brief Explanation: The Balance In Allowance For Doubtful Accounts Represents The Amount A Company Thinks It Will Not Collect From A Customer The correct answer is "True" , as Allowance For Doubtful Accounts represents such an estimation of percentage of amount of Accounts Receivable or Sales that may not be recovered from customers in future. It is assumed in allowance approach but not assumed in direct write-off method. For example, if the company / corporation sold goods of $50,000 to customers, then it is estimated on the basis of percentage of sales method that 2% of sales will not be collected from customers, which represent allowance for doubtful accounts (2 X $50,000 = $1,000). $1,000 is deducted from accounts receivables on balance sheet to calculate net realizable value of accounts receivable.

T/F: The Net Accounts Receivable Reported In The Current Asset Section Of A Company's Balance Sheet Represents All Receivables Expected To Be Collected Within The Next Year. The correct answer is "True" , as the Net Accounts Receivable (Gross Accounts Receivable - Allowance For Doubtful Accounts ) reported in the Current Asset Section of a company’s balance sheet represent all receivables expected to be collected within one accounting period or accounting cycle. It is the amount due from customers who don't make payment immediately, against the goods delivered or serviced performed to them by the company, but agreed to pay later on within the specified period. If some customers fails to pay, then it is confirmed that the some part of receivables will not be collected and there is a need to write-off that part of receivables from books of accounts.

On Which Financial Statement And At What Amount Accounts Receivable  Are Reported? - A Solution To Multiple Choice Question With Example Accounts Receivable are reported at Net Realizable Value on the Balance Sheet , which is the amount expected to be collected / received from customers and it is calculated after deducting the value of Allowance For Doubtful Accounts from Accounts Receivable. So, the correct answer of multiple choice question is “Balance Sheet At The Net Realizable Value” Example: If a company has gross amount of Accounts Receivable (Sundry Debtors) of Rs. 52000. The Allowance for Doubtful Accounts is estimated at 4% of Gross Accounts Receivable. What is the value at which, accounts receivable are reported / recorded on the balance sheet. Here, Allowance of Doubtful Accounts = 52000 X 4% = Rs. 2080 Accounts Receivable to be reported on the balance sheet = Gross Amount of Accounts Receivable - Allowance For Doubtful Accounts Accounts Receivable to be ...

Multiple Choice Question (MCQ) Answerr - If A Company Employs The Gross Method Of Recording Accounts Receivable From Customers, Then Sales Discounts Taken Should Be Reported As What? Reason: The correct answer is “As A Deduction From Sales In Income Statement”, as Sales Discount is a Contra Revenue Account which is deducted from Gross Sales Revenue in Income Statement in order to calculate Net Sales. In equation form, we can find out Net Sales as shown below: Net Sales = Gross Sales - Sales Returns & Allowances - Sales Discounts So, if a company or corporation employs or uses the gross method of recording / recognizing Accounts Receivable From Customers , then sales discounts taken should be reported as a deduction from Sales in Income Statement and it provides the better view / representation of financial statements because it shows the sales figure  of the company after deduction of returns & allowances and discounts for the accounting period.

Postage Stamps On Hand (Unused) Are Classified As: The correct Answer of this MCQ is (d) "A Prepaid Expense". Reason: Because, the business has not yet utilized the postage stamps ( these are purchased by the company from post office ) in office works but the payment made in advance to the post office i.e., in purchasing postage stamps ( Prepaid Expenses ). These are shown on the left side or assets side of balance sheet as Current Assets as these probable future economic benefits within a year. Used postage stamps are expensed out (charged to income statement during the accounting period) and no longer be treated as an asset on balance sheet.

Multiple Choice Question (MCQ) In Which Account Are Postage Stamps Classified? The correct Answer is (c) "Office Supplies" Reason: Postage Stamps is classified as Office Supplies as it is used in the office by the business for mailing to different persons for business purposes during the accounting period. A company must adjust the part of office supplies used and part of office supplies on hand as there is possibility that all of the office supplies (postage stamps) are not consumed at the end of the accounting period. So, the adjusting entry to record at the end of the accounting period is to debit office supplies used expense account and a credit to office supplies on hand. Office supplies on hand is a Current Asset and recorded on balance sheet while office supplies used is an expense and recorded in Income Statement for the period. All other options are not the right choices here.