These seven questions mix the pairs students confuse. Decide the type of each adjustment first, then calculate, then open the answer.
They follow the lessons in year-end adjustments that students confuse. For a separate set on single adjustments, use the adjustments practice page.
Questions 1 to 4: deciding the type
Question 1. Kedai Nora paid RM4 800 on 1 August for a 12-month service contract. The year ends on 31 December. Find the expense and say whether the remainder is accrued or prepaid.
Answer
Monthly amount = 4 800 ÷ 12 = RM400. Five months are used: expense = RM2 000. Seven months remain, so RM2 800 is prepaid, a current asset. Cash came before the service, so it is prepaid.
Question 2. Wages are paid every Friday. The year ends on Wednesday and the wages for Monday to Wednesday, RM450, are unpaid. State the adjustment.
Answer
The work was done but the cash has not moved, so RM450 is accrued wages, a current liability. The wages expense is increased by RM450 and profit falls by RM450.
Question 3. A printer costing RM6 000 is depreciated at 20% a year on cost. It was bought two years ago. Give the expense for this year and the carrying amount at the year-end.
Answer
Expense = 20% × 6 000 = RM1 200.
Accumulated depreciation after two years = 2 × 1 200 = RM2 400. Carrying amount = 6 000 − 2 400 = RM3 600.
Question 4. Explain in one sentence why RM2 400 of accumulated depreciation must not appear in the income statement.
Answer
It adds up the depreciation of earlier years as well as this year. Only this year’s amount belongs in this year’s profit, so including the total would understate profit.
Questions 5 to 7: allowances and combined effects
Question 5. Receivables are RM25 000, and a bad debt of RM1 000 is written off. The allowance is 4% of remaining receivables and the opening allowance is RM800. Find the total expense.
Answer
Remaining receivables = 25 000 − 1 000 = RM24 000. Closing allowance = 4% × 24 000 = RM960. Increase = 960 − 800 = RM160. Total expense = 1 000 + 160 = RM1 160.
Question 6. Receivables are RM20 000 with no bad debts. The allowance is 2% and the opening allowance is RM700. What is the effect on profit?
Answer
Closing allowance = 2% × 20 000 = RM400. The allowance falls by 700 − 400 = RM300, which is credited to the income statement. Profit rises by RM300.
Question 7. Net profit before adjustments is RM15 000. Adjust for rent prepaid RM600, interest accrued RM200 and commission received in advance RM350. Find the adjusted profit and check it against net assets.
Answer
Adjusted profit = 15 000 + 600 − 200 − 350 = RM15 050.
Net assets change by +600 − 200 − 350 = +50, which equals the change in profit, 15 050 − 15 000 = +50.
If you got these wrong
Return to the lesson that matches the question.
- Questions 1 and 2: separating accrued expense from prepaid expense with a dated timeline.
- Questions 3 and 4: distinguishing depreciation expense from accumulated depreciation.
- Questions 5 and 6: calculating an allowance adjustment from the supplied opening and closing balances.
- Question 7: showing how one adjustment affects both financial statements.
A teacher in one-to-one Accounting tuition can go through your own working if the same pair keeps swapping.