Commerce Accountancy

Accounting Principles and Practice

1,241 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 business organisation and correspondence joint stock company 3 - promotion and formation of a company formation and promotion of a company promoter promotion and formation of a company

Operating leverage examines _________________________.

  1. The effect of the change in the quantity on EBIT

  2. The effect of the change in EBIT on the EPS of the company

  3. The effect of the change in output to the EPS of the company

  4. The effect of change in EPS on the output of the company
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Operating leverage measures how a company's operating income (EBIT) changes in response to a change in sales volume or quantity of output.

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 operating profit, the incomes and expenses of purely financial nature are ________into account.

  1. taken

  2. not taken

  3. partially taken

  4. both a and c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Financial items, such as interest expenses or investment income, are not part of the core operating activities of a business and are therefore excluded when calculating operating 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

Loss on sale of asset is ____________ while calculating operating profit from net profit.

  1. added

  2. ignored

  3. deducted

  4. none
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 to be added while calculating operating profit from 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

__________ 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.