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

Select the most appropriate alternative from those given below:
Credit balance of Profit and Loss A/c indicates _______ .

  1. Gross Profit

  2. Gross Loss

  3. Net Profit

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

Net Profit is a profit which is generated by deducting all the indirect expenses from gross profit . Excess of  income over  expenditure in profit & loss account is called as net profit. 

                                                  Profit & Loss Account
Particulars                          Amount                      Particulars              Amount
To Salary                               10000                     By Gross Profit        70000
To Rent                                  35000                    
To Insurance                         10000 
To Indirect Expenses            10000
To Net profit                           5000
                                              -------------                                                 ----------------
                                              70000                                                     70000
                                            ---------------                                                ------------------

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

Expenses which are incurred to operate the business smoothly and efficiently are known as ________.

  1. operating expenses

  2. manufacturing expenses

  3. trading expenses

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

An operating expenses incurred in carrying out an organisation's day-to-day activities, but not directly associated with production. These expenses incurred to operate business smoothly and efficiently. Operating expenses include such things as payroll, sales commissions, etc. 

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) an example of operating expenses.

  1. General administration expenses

  2. Selling and marketing expenses

  3. Financial charges

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

Operating expenses are those expenditure that a business incurs to engage in any activities not directly associated with the production of goods or services These expenditure are the same as selling, general and administration 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/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

Net profit = Rs. 19,000
Non operating expenses = Rs. 500
Non operating incomes = Rs. 0
Using above information calculate Operating profit.

  1. RS. 19,500

  2. Rs. 19,000

  3. Rs. 18,500

  4. Rs. 18,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Operating profit = Net profit + Non operating expenses -  Non operating incomes
                          = Rs. 19,000 + Rs. 500 - Rs. 0
                          = Rs. 19,500.

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

Formula of Operating profit is equal to ___________.

  1. Net profit + Non operating expenses - Non operating incomes

  2. Net profit - Non operating expenses - Non opertaing incomes

  3. Net profit + Non operating expenses + Non operating incomes

  4. Net profit - Non operating expenses/ Non operating incomes
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Operating profit is the profit earned through the normal operations and activities of the business. Operating profit is the excess of operating revenue over operating expenses. Operating profit is calculated as:

Operating profit = Net profit + Non operating expenses - Non operating incomes.

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 gross profit over operating expenses is known as __________.

  1. operating profit

  2. gross profit

  3. net profit

  4. after tax profit
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Operating profit is the profit earned through the normal operations and activities of the business. Excess of gross profit over operating expenses is known as operating profit. Formula for calculating operating profit is:
Operating profit = Net profit + Non operating expenses - Non operating incomes.

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).