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

_______ is the income earned from the core operations of a business, excluding any financing or tax-related issues.

  1. Operating profit

  2. Operating loss

  3. Operating expenses

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

Earnings before interest and taxes is a measure of a firm's profit that includes all incomes and expenses except interest expenses and income tax expenses. This is known as operating profit. Operating profit is the excess of operating revenue over operating expenses. Operating profit is the income earned from the core operations of a business, excluding any financing or tax-related issues.

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 concept of _______ is used to investigate the profit-making potential of a business, excluding all extraneous factors.

  1. operating loss

  2. operating profit

  3. operating expense

  4. None of the above
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. Operating profit is the excess of operating revenue over operating expenses. Operating profit is the income earned from the core operations of a business, excluding any financing or tax-related issues. The concept of operating profit is used to investigate the profit-making potential of a business, excluding all extraneous factors.

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

If operating income is negative, a business will likely require additional outside funding to remain in operation.

  1. True

  2. False
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. 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. If operating income is negative, a business will likely require additional outside funding to remain in operation.

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 calculated as:
 Net profit + Non operating incomes - Non operating 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. 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

Calculate operating profit:
operating revenue = Rs. 10,000,000; COGS = Rs. 4,000,000; general and administrative expenses = Rs. 3,000,000; interest expense= Rs. 4,000,000; and income taxes = 900,000.

  1. Rs. 2,500,000

  2. Rs. 4,000,000

  3. Rs. 2,000,000

  4. Rs. 3,000,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Operating profit = Operating revenue - COGS - General and administration expenses
                          = Rs. 10,000,000 - Rs. 4,000,000 - Rs. 3,000,000
                          = Rs. 3,000,000.

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

A second hand machinery was purchased for $Rs. 10,00,000$ five years ago and was overhauled by carrying out some current repairs at a cost of $Rs. 1,00,000$. It has also an accumulated depreciation of $Rs. 5,00,000$. It has been desposed of in the beginning of the sixth year for $Rs. 6,00,000$. Profit/loss on such disposal shall be_________. 

  1. Profit of $Rs. 1,00,000$

  2. Loss of $Rs. 5,00,000$

  3. Loss of $Rs. 4,00,000$

  4. No profit, no loss
Reveal answer Fill a bubble to check yourself
D Correct answer
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 one of the following will lead to under statement of net profit?

  1. Amortization of fictitious assets

  2. Treating capital expenditure as revenue expenditure

  3. Treating revenue expenditure as capital expenditure

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

Treating capital expenditure (which should be an asset) as revenue expenditure (an expense) results in an overstatement of expenses, which directly leads to an understatement of 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

In the case of downward revaluation of an asset which is for the first time, the account to be debited is _________.

  1. Fixed Asset A/c

  2. Revaluation Reserve A/c

  3. Profit and Loss A/c

  4. General Reserve A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When an asset is revalued downward for the first time, the loss in value is treated as an expense and debited to the Profit and 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

Which of the following is NOT true with regard to preparation of Profit & Loss Account?

  1. Profit & Loss Account is prepared for a certain period and hence it is an interim statement

  2. Profit & Loss Account does not disclose the effect of non-financial items

  3. Net Profits are ascertained on the basis of current costs

  4. Net Profit as disclosed by Profit & Loss Account is not absolute
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Profit and Loss account is a final account prepared at the end of the year, not an interim statement. Interim statements are typically prepared for shorter periods like quarters.

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 Profit and Loss A/c shows the ________________.

  1. Financial results of the concern for a period

  2. Financial position of the concern on a particular date

  3. Financial results of the concern on a particular date

  4. Cost of goods sold during the period
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Profit and Loss account shows the financial performance (results) of a business over a specific period. The Balance Sheet shows the financial position at a specific date.