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Financial Forensics · Quiz 1 · 26 Feb 2023 · January 2023 term · Set QPE3

Question 10: XYZ Inc. purchased a fire insurance policy for an annual…

Question 10

+1 markOne correct option

XYZ Inc. purchased a fire insurance policy for an annual premium of ₹ 6,000 towards protection of goods up to ₹ 30,00,000. The entire amount was paid in cash immediately. How will this transaction be reflected in the balance sheet and income statement of XYZ Inc. on the date of purchase of fire insurance policy?

  1. A

    ₹ 30,00,000 will be treated as receivables and ₹ 6000 will be accounted asexpenses

  2. B

    Bank balance will reduce by ₹ 6000 and expenses will increase by ₹ 6000

  3. C

    Expenses will increase by ₹ 6000 and assets will increase by ₹ 6000

  4. D

    Bank balance will reduce by ₹ 6,000 and assets will increase by ₹ 6,000

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Correct answer

  • D

    Bank balance will reduce by ₹ 6,000 and assets will increase by ₹ 6,000

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Question 10 of 25 in the IIT Madras BS Financial Forensics (Financial Forensics) Quiz 1 paper sat on 26 Feb 2023, in the January 2023 term (IIT M DEGREE AN4 EXAM QPE4 26 Feb 2023). It carries 1 mark.

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