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

Opening balance of debtors is Rs. 18,000. 5% provision for bad debts is required to be provided on debtors. If the debtors balance is increased during the year by Rs. 5,000 and the provision for bad debt has a debit balance of Rs. 350 after transferring bad debts, the charge against the profit and loss account is ____________.

  1. Rs.1,950

  2. Rs. 1,500

  3. Rs. 650

  4. Rs. 550
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Opening balance of Debtors = Rs. 18000

The closing balance of debtors = Opening debtors + debtors during the year
= Rs. 18000 + 5000
= Rs. 23000
Now, we calculate the provision for bad debts on the Closing debtors.
Hence, Provision for bad debts = $Closing debtors \times \dfrac{Rate}{100}$
= $23000 \times \dfrac{5}{100}$
= 1150
The provision for bad debts has a Credit balance and the balance has to be Rs. 1150.
But, as given in the question the Provision for bad debts is showing a debit balance of Rs. 350.
Thus, the amount to be debited to the profit and loss account = 1150 + 350
= Rs. 1500
Thus, the correct option is B.

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

Operating profit is the excess of operating expenses over operating revenues.

  1. True

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

Operating is the profit through the normal operations and activities of the business. 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

Sales - Purchase - Operating expenses is equal to __________.

  1. net profit

  2. gross profit

  3.  operating profit

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

Operating profit is calculated by subtracting operating expenses (including the cost of goods sold/purchases) from sales. Gross profit is Sales minus COGS, and Net profit is Operating profit adjusted for non-operating items.

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

Read the following which is taken from an income statement.

Rs.
Opening stock $50,000$
Sales $1,60,000$
Freight incurred $10,000$
Sales returns $10,000$
Gross profit on sales  $60,000$
Net loss for the year  $10,000$
Purchases $1,00,000$
Purchases returns $9,000$

The value of closing stock will be:

  1. $Rs. 61,000$

  2. $Rs. 50,000$

  3. $Rs. 59,000$

  4. $Rs. 70,000$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Gross Profit = Sales - Sales Returns - (Opening Stock + Purchases - Closing Stock). 60,000 = (1,60,000 - 10,000) - (50,000 + 1,00,000 - Closing Stock). 60,000 = 1,50,000 - 1,50,000 + Closing Stock. Closing Stock = 60,000 + 1,000 (Freight) = 61,000.

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

The aim of preparing Profit and Loss Account is to find out__________.

  1. gross profit or gross loss

  2. net profit or net loss

  3. financial position of the business

  4. all of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The primary purpose of the Profit and Loss account is to determine the net profit or net loss of the business for a specific accounting period. Gross profit is determined in the Trading 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

Operating profit stated as a subtotal on a companies income statement before all general and administrative expenses.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B 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. Operating profit stated as a subtotal on a companies income statement after all general and 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

Operating profit represents the spending power of the company with regard to revenues generated from ongoing operations. 

  1. True

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

Operating profit represents the earning power of the company with regard to revenues generated from ongoing operations. Operating profit serves as an indicator to the business's potential profitability with all extraneous factor removed from the calculation.

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.