Net profit before following adjustment is Rs. 3,60,000 Outstanding salary is Rs. 20,000 Prepaid insurance is Rs. 26,000 After adjustment net profit is

The correct answer is: C. Rs. 3,46,000

Net profit before following adjustment is Rs. 3,60,000. Outstanding salary is Rs. 20,000 and prepaid insurance is Rs. 26,000.

Outstanding salary is an expense that has been incurred but not yet paid. Prepaid insurance is an asset that has been paid for but not yet used.

To calculate the adjusted net profit, we need to add the outstanding salary to the net profit before adjustment, and then subtract the prepaid insurance.

Therefore, the adjusted net profit is:

3,60,000 + 20,000 – 26,000 = 3,46,000

Here is a brief explanation of each option:

• Option A: Rs. 3,66,000. This is the net profit before adjustment, plus the outstanding salary. However, it does not take into account the prepaid insurance.
• Option B: Rs. 3,80,000. This is the net profit before adjustment, plus the prepaid insurance. However, it does not take into account the outstanding salary.
• Option C: Rs. 3,46,000. This is the correct answer. It takes into account both the outstanding salary and the prepaid insurance.
• Option D: Rs. 3,86,000. This is the net profit before adjustment, plus both the outstanding salary and the prepaid insurance. However, this is an incorrect answer because it double-counts the prepaid insurance.