Tag: forms of statements of profit and loss

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Multiple choice elements of accounts 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 _______ of operating revenue over operating expenses.

  1. excess

  2. deficit

  3. both a and b

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

Operating profit is defined as the difference between operating revenue and operating expenses; if revenue exceeds expenses, it is a 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

__________ is the gross inflow of economic benefits.

  1. Assets

  2. Liabilities

  3. Income

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

Income is defined as the increase in economic benefits during the accounting period in the form of inflows or enhancements of assets. Assets, liabilities, and expenses represent different categories of the accounting equation.

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 the operating expenses exceed gross profit, the excess is referred to as ______________.

  1. Operating income

  2. Operating loss

  3. Non-operating expenses

  4. Non-operating income
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

This can be represented as:


Sales                                                                     120000
Less: Cost of Goods Sold                                     80000
                                                                             --------------- 
Gross Profit                                                          40000
Less: Operating Expenses                                  60000
                                                                             ---------------
Operating Loss                                                   (20000)
                                                                           ----------------

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 + non operating expenses - non operating incomes.

  1. Operating Profit

  2. Gross profit

  3. Net profit

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

Operating profit is defined as the profit earned by the business from its core business activity. There are certain item of non operating expense and non operating income which are adjusted from operating profit to find out the net profit of the business. 


For example, dividend received on investment is an example of non operating income and loss on sale of fixed asset is an example of non operating expenses. 

Hence, Operating Profit = Net profit + Non Operating Expenses - Non operating 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

Anju Pvt. Provides following information:
                               Rs.
          Fixed cost = 90,000
                 Sales = 3,00,000
                  Profit = 60,000
What is the margin of safety of the company?

  1. Rs.60,000

  2. Rs 1,20,000

  3. Rs. 1,60,000

  4. Rs. 2,40,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Margin of safety = $\frac{Profit}{P/VRatio}$
                          = $\frac{60,000}{50%}$
                          = $\frac{60,000\times100}{50}$
                          = Rs.1,20,000

P/V Ratio = $\frac{F+P}{S}\times100$
                = $\frac{90,000+60,000}{3,00,000}\times100$
                = 50%.

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 - Cost of goods sold = ______________.

  1. Gross Profit

  2. Gross Loss

  3. Net Profit

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

Gross Profit is referred as the profit generated out of the core trading activity of the business. 

This can be calculated as: 

Sales - Cost of goods sold = Gross Profit

Cost of goods sold= Opening Stock + Purchases - Closing Stock 

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 __________ of operating revenue over operating expense.

  1. excess

  2. deficit

  3. balance

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

Operative profit means the profit generated through normal business operations. Excess of operating revenue over operating expenses is called operating profit. 


This can be shown below: 

Sales                                        Rs.100000           
Less: Cost of Goods Sold      Rs.  75000
                                              --------------------
Gross Profit                             Rs. 25000
Less: Operating Expenses     Rs. 15000
                                               -------------------
Operating Profit                      Rs. 10000
                                               ------------------

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.