Tag: operating profit (ebit)

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Questions Related to operating profit (ebit)

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

Loss on sale of asset is ____________ while calculating operating profit from net profit.

  1. added

  2. ignored

  3. deducted

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

Operating profit is calculated by deducting the operating expenses from the operating income. Operating expenses are those which are directly related to the core business activity. 

Loss on sale of asset is to be added while calculating operating profit from 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

Operating Profit is also known as ____________.

  1. EBIT

  2. EAIT

  3. NPAT

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

Operating profit is calculated by deducting the operating expenses from the operating income. Operating expenses are those which are directly related to the core business activity. 

Operating Profit is also known as EBIT (Earning before Interest & Tax)

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 non operating expense.

  1. Loss on sale of Asset

  2. Bad debts

  3. Carriage

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

Operating profit is calculated by deducting the operating expenses from the operating income. Operating expenses are those which are directly related to the core business activity. 

Loss on sale of asset is a non operating expenses. Hence it should not be considered while calculating the operating 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

Interest and taxes are ___________ from operating profit to find out the net profit.

  1. added

  2. deducted

  3. no effect

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

Net profit is calculated by taking the operating profit and subtracting non-operating items, including interest and taxes. These are costs that must be removed from the operating result to arrive at the final bottom line.

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 finance expense.

  1. Salary

  2. Rent

  3. Interest on loan

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

Interest on a loan is a cost of borrowing capital, which classifies it as a finance expense. Salary, rent, and advertisement are typically classified as operating or 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

Select the most appropriate alternative from those given below:
Gross Profit or Gross Loss is transferred to _______ Account.

  1. Profit and Loss

  2. Trading

  3. Profit and Loss Appropriation

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Trading account is prepared to know the profit earned by the firm through the trading activity. Trading account is prepared by considering only direct expenses. Gross Profit depicts the direct profit earned by the firm through trading of goods.


Gross Profit or Gross Loss is transferred to profit & 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

Excess of credit over debit in Profit and Loss A/c indicates ________.

  1. Net Profit

  2. Gross Profit

  3. Gross Loss

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

Profit and loss account is prepared to know the profitability of the firm. All the indirect expense are debited and indirect income are credited  to find out the net profit. 


Excess of credit (Income) over debit (Expense) indicates net profit of the firm. 

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.