Tag: forms of statements of profit and loss

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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 not the integral part of profit & loss account.

  1. Bank interest received

  2. Discount received

  3. Sales

  4. Rent of property received
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Sales are recorded in the trading account to determine gross profit. The profit and loss account is used for indirect expenses and incomes, not for direct sales figures.

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

What is transferred to capital account?

  1. Gross profit

  2. Net profit

  3. Gross sales revenue

  4. Net sales revenue
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Net profit represents the final earnings of the business after all expenses and taxes. This amount is transferred to the capital account to increase the owner's equity.

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

Adjusted profit and loss are used in____________.

  1. budgetary control technique

  2. information technique

  3. financial accounts preparation technique

  4. for bounced cheques
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Adjusted profit and loss accounts are frequently used in budgetary control to compare actual performance against budgeted figures and make necessary adjustments for future planning.

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 is the characteristic feature of profit & loss account?

  1. Account transferred to profit & loss account do not exist after being transferred to profit & loses account

  2. It is prepared at the last date of the accounting period.

  3. It is a statement

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

A key feature of the profit and loss account is that it is a nominal account; once the balances are transferred to the capital account, the nominal accounts themselves are closed for that 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

The trading account does not __________.

  1. calculate gross profit

  2. compare the sales with the cost of those sales

  3. include the cost of goods sold

  4. show the effect of profit on capital
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A trading account helps in determining the gross profit or gross loss of a business made strictly out of trading activities. Only direct revenue and direct expenses are considered in it. 

It is prepared mainly to know the profitability of goods. In this indirect expenses and indirect revenue are not included. So, it can not show the effect of profit on capital. In Capital net profit is added. 

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

Valuing closing stock at a cost is an application of which concept?

  1. Consistency

  2. Dual aspect

  3. Prudence

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

The prudence concept (or conservatism) dictates that assets should not be overstated. Therefore, closing stock is valued at the lower of cost or market value to avoid recognizing unrealized profits.

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

Assuming no returns outwards or carriage inwards, the cost of goods sold will be equal to _______.

  1. opening stock plus purchases plus closing stock

  2. closing stock less purchases plus opening stock

  3. sales less gross profit

  4. purchases plus closing stock less opening stock
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Assuming no returns outwards or carriage inwards, the cost of goods sold will be equal to Sales less gross profit. Goods are sold at cost plus profit. So. sales less gross profit represents the cost of goods sold.

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 part of income statement, which is prepared to ascertain the profit/ loss for a given accounting period.

  1. Manufacturing A/c

  2. Profit and Loss A/c

  3. Balance Sheet

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

Final Account is the final process of accounting. Final accounts include the preparation of Trading account, Profit and Loss account and Balance Sheet. The main purpose of this account is to show the profit or loss earned by the firm during the accounting period. It shows the profitability of the business. 

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

Gross profit less expense is known as __________.

  1. cost of goods sold

  2. net turnover

  3. total drawings

  4. net profit
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Net Profit is the measure of the true profitability of a venture after accounting for all costs and taxes. It is the actual profit and includes the operating expenses that are excluded from gross profit. So,
Gross Profit - Operating Expenses = 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

Net turnover can be calculated as ____________.

  1. Sales less returns outwards

  2. Gross profit plus cost of goods sold

  3. Purchases plus opening stock less returns outwards

  4. Sales plus returns inwards
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Net turnover included the revenues from the sale of goods and provided services.
Gross Profit = Net Turnover - Cost of Goods Sold
So, 
Net Turnover = Gross Profit + Cost of Goods Sold.