CMA Intermediate · Financial Accounting · Final Accounts of Commercial Organisations
Sharma Traders paid an annual insurance premium of Rs 24,000 on 1 October 2025 for the twelve months ending 30 September 2026. Its financial year ends on 31 March 2026. What amount of prepaid insurance will appear in the Balance Sheet as at 31 March 2026?
Prepaid insurance is Rs 12,000, because the premium of Rs 24,000 covers twelve months and six of those months, April to September 2026, fall after the 31 March 2026 year end, so half the premium is carried forward.
- ARs 6,000
- BRs 12,000Correct
- CRs 18,000
- DRs 24,000
Explanation
Premium covers 12 months. Six months (April to September 2026) fall after the year end. Prepaid = 24,000 x 6/12 = Rs 12,000. Rs 6,000 would result from using only three months, which is the wrong period.
Did you get it right without looking?
One question tells you little. A timed set on Final Accounts of Commercial Organisations shows your real accuracy, how long you take and where you lose marks.
More Final Accounts of Commercial Organisations questions
- Gupta & Co. closed its books on 31 March with salaries paid of Rs 1,20,000, which includes Rs 10,000 paid in advance for April. Salaries of …
- Iyer Brothers' trial balance shows machinery of Rs 5,00,000 (purchased 1 April two years ago) with depreciation charged at 10% on the writte…
- At the end of the year, the trial balance of Sharma Traders did not agree, and the debit side was short by ₹4,500. Which of the following is…
- Which of the following items is correctly shown on the debit side of the Trading Account of a trading firm?
- Kaveri Ltd. has a trial balance showing Trade receivables Rs 6,00,000 (including Rs 40,000 of bad debts to be written off) and Provision for…
- Which of the following items would be presented under 'Other income' (and not under revenue from operations) in the Statement of Profit and …