Tag: meaning, need and format of profit and loss account

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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

On $31^{st}$ March, $2009$ Ram has loan of Rs. $50,000$ and creditors of Rs. $80,000$ Fixed assets of Rs. $72,000$, stock Rs. $90,000$ and cash in hand Rs. $60,000$. If he had started business on April $1$ $2008$ with capital of Rs. $50,000$. Compute Profit earned by Ram for year $2008-09$.

  1. Rs. $92,000$

  2. Rs. $42,000$

  3. Rs. $1,72,000$

  4. Rs. $52,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Closing Capital = Assets - Liabilities. Closing Capital = (72000 + 90000 + 60000) - (50000 + 80000) = 222000 - 130000 = 92000. Profit = Closing Capital - Opening Capital = 92000 - 50000 = 42000.

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

There was a stock of Rs. $5,500$ out of which stock of Rs. $500$ was burnt due to fire and was disposed off for Rs. $200$. Remaining goods were sold at $25\%$ above cost price. Find net profit.

  1. Rs. $6,250$

  2. Rs. $7,200$

  3. Rs. $6,575$

  4. Rs. $5,950$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Stock available = Rs.5500
Burnt due to fire = Rs.500
Goods available for sale= Rs.5000
25% of Rs. 5000= Rs.1250
Selling price= Rs.6250(5000+1250)
less: loss due to fire=Rs. 300
Net Profit=Rs.5950

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

Final Accounts of a company are prepared according to _________ of companies Act, $2013$.

  1. Schedule IV

  2. Schedule II

  3. Schedule III

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

The balance sheet of a company is prepared as per the format prescribed in part I of Schedule III of the Companies Act, 2013. The Schedule III prescribes only the vertical format for presentation of financial statements. Thus, a company will now not have an option to use horizontal format for the presentation of financial statements.

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

According to the Companies Act, $2013$, a company may issue fully paid up bonus shares to its members, out of ___________.

  1. Free reserves

  2. Security premium account

  3. Capital redemption reserve account

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

Bonus shares are issued by the company to the existing shareholders when the company is having short of cash but the shareholders are expecting a regular income. Issue of bonus shares does not involve any cash outflow.

The Companies Act 2013 has specifically introduced section 63 to deal with bonus shares. The company can issue fully paid bonus shares from the following sources:
Free reserves of the company
  • Share premium account
  • Capital redemption reserve 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

While calculating Operating profit the incomes and expenses of purely ____________ nature are not taken into account.

  1. operating

  2. trading

  3. financial

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

Operating profit is defined as the profit earned by the firm during the course of normal trading operations. To calculate the operating profit, operational expenses are deducted from operational income. 


Expense of purely of financial nature need not to be taken into account while calculating the operational profit like interest on loan, dividends etc.

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

Income derived from, normal operation of the business is called ________.

  1. normal income

  2. manufacturing income

  3. operating income

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

Operating income resulting from a firm's primary business operations (normal operations), excluding extraordinary income and expenses. Also called earning before interest and taxes. the measure revels an entity's ability to generate earnings from its operational 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

Given the following data:
Gross profit Rs.$6,700$; Carriage Inwards Rs.$250$; received Rs.$575$ and other expenses Rs.$3,600$. The net profit of the firm would be:

  1. Rs. $3,275$

  2. Rs. $3,025$

  3. Rs. $3,425$

  4. Rs. $3,675$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Net Profit = Gross Profit + Other Income - Expenses. Net Profit = 6700 + 575 - 250 - 3600 = 3425. Note: Carriage inwards is a direct expense and should have been deducted from Gross Profit already, but based on the provided data structure, we calculate: 6700 + 575 - 3600 = 3675.