Tag: company final accounts

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Questions Related to company final accounts

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 of the following items are not considered while calculating operating profit?

  1. Finance expenses.

  2. Non-Operating expenses.

  3. Appropriations.

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

Operating profit is calculated by subtracting operating expenses from gross profit. Finance expenses, non-operating expenses, and appropriations are excluded from this calculation as they relate to financing or non-core activities.

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

EBIT stands for ____________.

  1. Earning Before Interest and Tax

  2. Equity Before Interest and tax

  3. Earning Before Insurance and tax

  4. None
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Earning before Interest and Tax is termed as "EBIT" in short. 


Earning before Interest and Tax means the situation where the interest paid and taxes are not considered while deducting the expenses from the income. 

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 the profit a business earns from the business through the _________.

  1. operations

  2. activities

  3. both

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

Operating profit is specifically derived from the core operations of a business. While activities is a broad term, operations is the standard accounting terminology used in this context.

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

Operating Profit is also known as ____________.

  1. EBIT

  2. EAIT

  3. NPAT

  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. 

Operating Profit is also known as EBIT (Earning before Interest & Tax)

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

Select the most appropriate alternative from those given below:
Gross Profit or Gross Loss is transferred to _______ Account.

  1. Profit and Loss

  2. Trading

  3. Profit and Loss Appropriation

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Trading account is prepared to know the profit earned by the firm through the trading activity. Trading account is prepared by considering only direct expenses. Gross Profit depicts the direct profit earned by the firm through trading of goods.


Gross Profit or Gross Loss is transferred to profit & 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

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.