Commerce Accountancy · Banking Financial Awareness

Corporate Profit and Loss

226 Questions

Corporate profit and loss questions evaluate financial literacy through profitability ratios and investment returns. These concepts help assess the financial health of a business entity. The topic is essential for commerce students and banking aspirants.

Profitability index ratiosReturn on equityNet earnings formulasGross profit analysisAdvertising ROI calculations

Corporate Profit and Loss Questions

Multiple choice business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

Suppose that a firm had an unsold stock worth of Rs 100 at the beginning of a year. During the year it had produced Rs 1,000 worth of goods and managed to sell Rs 800 worth of goods. Calculate inventory for the year ___________.

  1. 100

  2. 200

  3. 300

  4. 400
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Inventory at the end of the year is calculated as: Opening Stock + Production - Sales. Here, 100 + 1000 - 800 = 300.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

From the following details calculate net profit on accrual basis.

Particulars Rs.
Goods sold for cash $5,00,000$
Credit sales $25,000$
Cash purchases $4,00,000$
Credit purchases $50,000$
Wages paid $20,000$
Outstanding expenses $10,000$
Rent paid $5,000$
Rent outstanding $2,000$
Depreciation on building $10,000$
Loss on sales of fixed assets $1,000$
  1. Rs. $75,000$
  2. Rs. $27,000$
  3. Rs. $32,000$
  4. Rs. $40,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

                                                      Net Profit for the year Ended..

          Amount |          Particular |          Amount | | --- | --- | --- | --- | | To Purchase a/c Cash -400000 Credit-50000 | 450000 | By Sales a/c Cash-500000 Credit-25000 | 525000 | | To Wages Paid A/c | 20000 |   |   | | To O/s Expenses A/c | 10000 |   |   | | To Rent Paid A/c            5000

  • O/s 2000 | 7000 |   |   | | To Depreciation on building A/c | 10000 |   |   | | To loss on sale of fixed assets A/c | 1000 |   |   | | To Net profit transferred A/c | 27000 |   |   | |   | 525000 |   | 525000 |

 

Multiple choice business organisation and correspondence companies act, 2013 - introduction and characteristics introduction to companies companies act, 2013 company

According to the provisions of Companies Act, 2013 atleast what percent of the average net profits of the company shall be spend in pursuance of CSR activities?

  1. 10 percent

  2. 8 percent

  3. 3 percent

  4. 2 percent
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Section 135 of the Companies Act, 2013 requires companies meeting certain criteria to spend at least 2 percent of their average net profits made during the three immediately preceding financial years on Corporate Social Responsibility (CSR) activities.

Multiple choice business organisation and correspondence companies act, 2013 - introduction and characteristics introduction to companies companies act, 2013 company

Profit making companies are required to spend  _____% their average net profit for activities related to corporate social responsibility.

  1. 2

  2. 1.5

  3. 1

  4. 2.5
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under Section 135 of the Companies Act, 2013, certain profit-making companies are required to spend at least 2% of their average net profits made during the three immediately preceding financial years on Corporate Social Responsibility (CSR) activities.

Multiple choice

Gross profit is the amount of revenue before taxes

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Gross profit is calculated as revenue minus the cost of goods sold, representing the profit a company makes after deducting the direct costs associated with producing its products. It is not simply revenue before taxes, which relates to pre-tax income or earnings.

Multiple choice commercial studies budgeting meaning and objectives of cash flow statement statement of changes in financial position meaning merits and demerits of cash flow statement

Free cash flow is Rs 17000 and net investment in operating capital is Rs 10000 then net operating profit after taxes would be __________.

  1. Rs 7, 000.00

  2. Rs 27, 000.00

  3. Rs - 27, 000.00

  4. Rs - 7, 000.00
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Free Cash Flow (FCF) = NOPAT - Net Investment. Given FCF = 17000 and Net Investment = 10000, then 17000 = NOPAT - 10000. Therefore, NOPAT = 17000 + 10000 = 27000.

Multiple choice commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

Net investment in operating capital is Rs 5000 and net operating profit after taxes is Rs 8000 then free cash flow would be __________.

  1. Rs 13, 000.00
    • Rs 3, 000.00

  3. Rs 3, 000.00
    • Rs 13, 000.00
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Free Cash Flow (FCF) is calculated as Net Operating Profit After Taxes (NOPAT) minus Net Investment in Operating Capital. Here, 8000 - 5000 = 3000.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

The issue of debentures less than the face value is called_______.

  1. at par

  2. at premium

  3. at discount

  4. none of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When debentures are issued by the company at a price less than its nominal value (face value), it is said to be issued at discount.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Which of the following statements is false?

  1. Debenture is a form of public borrowing

  2. It is customary to prefix debentures with the agreed rate of interest

  3. Debenture interest is a charge against profits

  4. The issue price and redemption value of debentures cannot differ.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The issue price and redemption value frequently differ; for example, a company may issue at a discount and redeem at par, or issue at par and redeem at a premium.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Which of the following is true with regard to $10\%$ Debentures issued at a discount of $20\%$?

  1. The carrying amount of debentures get reduced each year at a rate of $20\%$

  2. Issue price and the carrying amount of debenture are equal

  3. At the time of redemption, the debenture holder will be paid the issued price.

  4. The carrying amount of debentures remain the same.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The carrying amount of a debenture refers to its face value (the liability amount). While the issue price is lower due to the discount, the liability recorded in the books remains the face value.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Interest on Debentures is calculated on -

  1. Its face value

  2. Its issue price

  3. Its book value

  4. Its cost price
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The interest is calculated on the face value of the debentures. This interest amount is paid periodically, generally yearly or half-yearly. The interest is a charge against the profit of the company.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

When debentures are issued at a discount it is prudent to write off the discount:

  1. in the year of the issue of debentures

  2. within 5 years of the issue of debentures

  3. during the life of debentures

  4. in the year of redemption of debetures
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

To follow the matching principle, the discount on issue should be amortized over the entire period the company benefits from the borrowed funds.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Interest payable on debentures is?

  1. An appropriation of profits of the company

  2. A charge against profit of the company

  3. Transferred to sinking fund investment account

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

Interest on debentures is a mandatory payment to creditors, making it a charge against profits, which must be deducted to arrive at the net profit.