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An amount of Rs.68,000 was paid on 3/3/17 19. for advertisement in a newspaper. This was published in the newspaper on 3/4/17. This expenditure will be shown as____
  • a)
    Liability in the balance sheet on 31/3/17
  • b)
    Prepaid expenses on the assets side of Balance Sheet on 31/3/17
  • c)
    An expense in the Profit and Loss A/c for the year ended 31/3/17
  • d)
    None of the above
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
An amount of Rs.68,000 was paid on 3/3/17 19. for advertisement in a n...
Explanation:

The given transaction is related to an advertisement expense in a newspaper. The payment of Rs.68,000 was made on 3/3/17, but the advertisement was published in the newspaper on 3/4/17. Therefore, this expenditure will be treated as a prepaid expense as on 31/3/17.

Prepaid Expense:

Prepaid expenses are those expenses which have been paid in advance but the benefit of which is still to be received. In other words, prepaid expenses are expenses paid in advance for goods or services that have not yet been received or consumed. These expenses are shown on the assets side of the balance sheet.

Treatment of the given transaction:

As the payment for the advertisement was made on 3/3/17 but the advertisement was published on 3/4/17, the benefit of this expenditure was not received in the same accounting period. Hence, it will be treated as a prepaid expense as on 31/3/17, which is the end of the accounting period. Therefore, the correct answer is option B, i.e., prepaid expenses on the assets side of the balance sheet on 31/3/17.

Conclusion:

In conclusion, prepaid expenses are shown on the assets side of the balance sheet. These expenses are treated as assets because the benefit of the expenditure is yet to be received. In the given transaction, the payment for the advertisement was made in advance, and the benefit was yet to be received. Therefore, it was treated as a prepaid expense on the assets side of the balance sheet.
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An amount of Rs.68,000 was paid on 3/3/17 19. for advertisement in a newspaper. This was published in the newspaper on 3/4/17. This expenditure will be shown as____a)Liability in the balance sheet on 31/3/17b)Prepaid expenses on the assets side of Balance Sheet on 31/3/17c)An expense in the Profit and Loss A/c for the year ended 31/3/17d)None of the aboveCorrect answer is option 'B'. Can you explain this answer?
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An amount of Rs.68,000 was paid on 3/3/17 19. for advertisement in a newspaper. This was published in the newspaper on 3/4/17. This expenditure will be shown as____a)Liability in the balance sheet on 31/3/17b)Prepaid expenses on the assets side of Balance Sheet on 31/3/17c)An expense in the Profit and Loss A/c for the year ended 31/3/17d)None of the aboveCorrect answer is option 'B'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about An amount of Rs.68,000 was paid on 3/3/17 19. for advertisement in a newspaper. This was published in the newspaper on 3/4/17. This expenditure will be shown as____a)Liability in the balance sheet on 31/3/17b)Prepaid expenses on the assets side of Balance Sheet on 31/3/17c)An expense in the Profit and Loss A/c for the year ended 31/3/17d)None of the aboveCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for An amount of Rs.68,000 was paid on 3/3/17 19. for advertisement in a newspaper. This was published in the newspaper on 3/4/17. This expenditure will be shown as____a)Liability in the balance sheet on 31/3/17b)Prepaid expenses on the assets side of Balance Sheet on 31/3/17c)An expense in the Profit and Loss A/c for the year ended 31/3/17d)None of the aboveCorrect answer is option 'B'. Can you explain this answer?.
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