Tag: operating profit (ebit)

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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

State the reasons whether the following are true or false.
The gain from sale of capital assets need not be added to revenue to ascertain the net profit of a business.

  1. True

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

Gains from the sale of capital assets are non-operating gains and are typically included in the Profit and Loss account to determine the net profit for 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

From the following details calculate the net profit for the year ending $31-3-2015$

Particulars Rs.
Opening Stock $1,50,000$
Purchase $2,50,000$
Manufacturing Expenses $80,000$
Selling Expenses $20,000$
Administration Expenses $10,000$
Financial Charges $5,000$
Sales $5,55,000$

Sales include damaged goods sold for Rs. $5,000$ against the cost price of Rs. $12,000$. Gross profit margin on normal sales is $20\%$ on the sales.

  1. Rs. $65,000$

  2. Rs. $68,000$

  3. Rs. $70,000$

  4. Rs. $77,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Normal sales = 5,55,000 - 5,000 = 5,50,000. GP on normal = 20% of 5,50,000 = 1,10,000. Loss on damaged goods = 12,000 - 5,000 = 7,000. Total GP = 1,10,000 - 7,000 = 1,03,000. Net Profit = 1,03,000 - 20,000 - 10,000 - 5,000 = 68,000.

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

Which is the characteristic feature of profit & loss account?

  1. Accounts 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

Once accounts are transferred to the Profit and Loss account, they are closed and their balances are zeroed out for the next period, which is a fundamental characteristic of the closing process.

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 a sole traders profit and loss account firm taxation accounts are not present because ______________.

  1. the proprietor of such a business pays income tax in his private capacity

  2. the Income tax department has not made laws regarding the taxation of firms

  3. as sole trader has a simple business so tax paying is not required

  4. the business is separate undertaking for the purposes of tax
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In a sole proprietorship, the business is not a separate legal entity for tax purposes. The proprietor is personally liable for income tax on the business 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

Everyday office expenses are charged to _____________.

  1. Selling expenses

  2. Administrative expenses

  3. Marketing expenses

  4. Financial expenses
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Office expenses, such as stationery, salaries of office staff, and utilities, are classified as administrative expenses because they support the general management 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

Which of the following would not appear in the profit and loss account?

  1. Rent received

  2. Cash expenses

  3. Carriage outwards

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

Drawings represent personal withdrawals by the owner and are recorded in the capital account or balance sheet, not the profit and loss account. Rent received, cash expenses, and carriage outwards are all operational income or expense items that appear in 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

__________ profit is profit before interest and tax (EBIT).

  1. Net

  2. Operating

  3. Gross

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

Operating profit is defined as profit before interest and tax (EBIT). It measures the profit generated from core business operations before accounting for financial costs or tax obligations.

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

Dividend received from shares entry is made in ______________.

  1. Trading account

  2. Profit and loss account

  3. Balance sheet

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Dividends received represent non-operating income for a business. Such income is recorded in the profit and loss account as part of the total net profit 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

Basic principle to be followed while preparing trading and profit & loss account is ____________________.

  1. Expenses for the full trading period should be included

  2. Revenue received for the whole period be included

  3. Expenditure which is for other period to be included

  4. Both a & b
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The accrual basis of accounting requires that all revenues and expenses related to the specific accounting period be included in the financial statements for that period, regardless of when cash is received or paid.

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 statement is true?

  1. Gross profit - gross loss = Net profit

  2. Gross profit - net loss = Net profit

  3. Net profit - Net loss = Net profit

  4. Total revenue - total expenses = net profit
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Net profit is calculated by taking total revenue and subtracting all total expenses incurred during the period. The other options use incorrect terminology or mathematical relationships.