Commerce Accountancy

Accounting Principles and Practice

1,227 Questions

Accounting principles and practice questions cover core concepts like assets, depreciation, financial statements, and ledger adjustments. These topics are essential for commerce students preparing for academic and competitive exams. Regular practice ensures a strong grasp of standard accounting standards and business operations.

Asset depreciationFinancial statement adjustmentsAccounting standardsSingle entry systemCapital expenditure

Accounting Principles and Practice Questions

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

__________ is non operating expense.

  1. Loss on sale of Asset

  2. Bad debts

  3. Carriage

  4. Royalty
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Operating profit is calculated by deducting the operating expenses from the operating income. Operating expenses are those which are directly related to the core business activity. 

Loss on sale of asset is a non operating expenses. Hence it should not be considered while calculating the operating net profit. 

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Interest and taxes are ___________ from operating profit to find out the net profit.

  1. added

  2. deducted

  3. no effect

  4. none
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Net profit is calculated by taking the operating profit and subtracting non-operating items, including interest and taxes. These are costs that must be removed from the operating result to arrive at the final bottom line.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

___________ is finance expense.

  1. Salary

  2. Rent

  3. Interest on loan

  4. Advertisement
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Interest on a loan is a cost of borrowing capital, which classifies it as a finance expense. Salary, rent, and advertisement are typically classified as operating or administrative expenses.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Excess of credit over debit in Profit and Loss A/c indicates ________.

  1. Net Profit

  2. Gross Profit

  3. Gross Loss

  4. Net Loss
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Profit and loss account is prepared to know the profitability of the firm. All the indirect expense are debited and indirect income are credited  to find out the net profit. 


Excess of credit (Income) over debit (Expense) indicates net profit of the firm. 

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

An account to which the balance in depreciation account is transferred is _____________ .

  1. Trading A/c

  2. Profit and Loss A/c

  3. Depreciation A/c

  4. Fixed assets A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Depreciation is an operating expense that represents the allocation of the cost of a fixed asset over its useful life. This expense is closed out to the Profit and Loss account at the end of the period.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

______ is/are example(s) of non-operating income.

  1. Profit from sale of assets

  2. Dividend

  3. Refund of income-tax

  4. All the three
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Non-operating income, in accounting and finance, is gain or losses from sources not related to the typical activities of the business or organisation. Non-operating income can include gains or losses from investments, property or assets sales, dividend, currency exchange, refund of income-tax, and other a typical gains or losses.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Items of business operations does not include _________.

  1. interest earned

  2. raw material expenses

  3. sales return

  4. depreciation on plant and machinery
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Interest earned is a non-operating income item, as it results from investing activities rather than the core business operations. Raw material expenses, sales returns, and depreciation are all directly related to business operations.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

While calculating _______, the incomes and expenses of a purely financial nature are not taken into account.

  1. Net profit

  2. Operating profit

  3. Net loss

  4. Operating loss
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Operating profit is the excess of operating revenue over operating expenses. While calculating operating profit, the incomes and expenses of purely financial nature are not taken into account. Thus, operating profit is profit before interest and tax (EBIT).

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Net result of the business operation is reflected in ___________.

  1. The profit earned or loss suffered during a particular period

  2. The financial position on the business concern

  3. Total value of the assets

  4. Sum total of the value of liabilities
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Profit and Loss account summarizes the revenues and expenses of a business over a period to determine the net profit or loss. The other options relate to the Balance Sheet.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

The loss on sale of old motor car is debited to___________. 

  1. profit and loss account

  2. motor car account

  3. depreciation account

  4. cash account
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Loss on the sale of a fixed asset is a non-operating expense. Such losses are recorded in the Profit and Loss account to reflect the decrease in the value of the business assets.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Operating profit is also known as operating income, or earning before _______.

  1. investment and income

  2. income and taxes

  3. interest and taxes

  4. Investment and taxes
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Operating profit is the profit earned through the normal operations and activities of the business. However, while calculating operating profit expenses which are of financial nature are not taken into consideration. Operating profit is the excess of operating revenue over operating expenses.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

_______ is the income earned from the core operations of a business, excluding any financing or tax-related issues.

  1. Operating profit

  2. Operating loss

  3. Operating expenses

  4. Operating income
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Earnings before interest and taxes is a measure of a firm's profit that includes all incomes and expenses except interest expenses and income tax expenses. This is known as operating profit. Operating profit is the excess of operating revenue over operating expenses. Operating profit is the income earned from the core operations of a business, excluding any financing or tax-related issues.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

Which one of the following will lead to under statement of net profit?

  1. Amortization of fictitious assets

  2. Treating capital expenditure as revenue expenditure

  3. Treating revenue expenditure as capital expenditure

  4. Creation of general reserve
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Treating capital expenditure (which should be an asset) as revenue expenditure (an expense) results in an overstatement of expenses, which directly leads to an understatement of net profit.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

In the case of downward revaluation of an asset which is for the first time, the account to be debited is _________.

  1. Fixed Asset A/c

  2. Revaluation Reserve A/c

  3. Profit and Loss A/c

  4. General Reserve A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When an asset is revalued downward for the first time, the loss in value is treated as an expense and debited to the Profit and Loss account.

Multiple choice commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

The Profit and Loss A/c shows the ________________.

  1. Financial results of the concern for a period

  2. Financial position of the concern on a particular date

  3. Financial results of the concern on a particular date

  4. Cost of goods sold during the period
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Profit and Loss account shows the financial performance (results) of a business over a specific period. The Balance Sheet shows the financial position at a specific date.