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

Quizzes (0) Questions (97)

Questions Related to meaning, need and format of 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

______ is (are) an example of operating expenses.

  1. General administration expenses

  2. Selling and marketing expenses

  3. Financial charges

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

Operating expenses are those expenditure that a business incurs to engage in any activities not directly associated with the production of goods or services These expenditure are the same as selling, general and administration 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

______ is/are example(s) of non-operating income.

  1. Profit from sale of assets

  2. Dividend

  3. Refund of income-tax

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

Non-operating income, in accounting and finance, is gain or losses from sources not related to the typical activities of the business or organisation. Non-operating income can include gains or losses from investments, property or assets sales, dividend, currency exchange, refund of income-tax, and other a typical gains or losses.

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

Items of business operations does not include _________.

  1. interest earned

  2. raw material expenses

  3. sales return

  4. depreciation on plant and machinery
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Interest earned is a non-operating income item, as it results from investing activities rather than the core business operations. Raw material expenses, sales returns, and depreciation are all directly related to business operations.

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 = Rs. 19,000
Non operating expenses = Rs. 500
Non operating incomes = Rs. 0
Using above information calculate Operating profit.

  1. RS. 19,500

  2. Rs. 19,000

  3. Rs. 18,500

  4. Rs. 18,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Operating profit = Net profit + Non operating expenses -  Non operating incomes
                          = Rs. 19,000 + Rs. 500 - Rs. 0
                          = Rs. 19,500.

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

Formula of Operating profit is equal to ___________.

  1. Net profit + Non operating expenses - Non operating incomes

  2. Net profit - Non operating expenses - Non opertaing incomes

  3. Net profit + Non operating expenses + Non operating incomes

  4. Net profit - Non operating expenses/ Non operating incomes
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Operating profit is the profit earned through the normal operations and activities of the business. Operating profit is the excess of operating revenue over operating expenses. Operating profit is calculated as:

Operating profit = Net profit + Non operating expenses - Non operating incomes.

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 gross profit over operating expenses is known as __________.

  1. operating profit

  2. gross profit

  3. net profit

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

Operating profit is the profit earned through the normal operations and activities of the business. Excess of gross profit over operating expenses is known as operating profit. Formula for calculating operating profit is:
Operating profit = Net profit + Non operating expenses - Non operating incomes.

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 _______, the incomes and expenses of a purely financial nature are not taken into account.

  1. Net profit

  2. Operating profit

  3. Net loss

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

Operating profit is the excess of operating revenue over operating expenses. While calculating operating profit, the incomes and expenses of purely financial nature are not taken into account. Thus, operating profit is profit before interest and tax (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

Opening balance of debtors is Rs. 18,000. 5% provision for bad debts is required to be provided on debtors. If the debtors balance is increased during the year by Rs. 5,000 and the provision for bad debt has a debit balance of Rs. 350 after transferring bad debts, the charge against the profit and loss account is ____________.

  1. Rs.1,950

  2. Rs. 1,500

  3. Rs. 650

  4. Rs. 550
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Opening balance of Debtors = Rs. 18000

The closing balance of debtors = Opening debtors + debtors during the year
= Rs. 18000 + 5000
= Rs. 23000
Now, we calculate the provision for bad debts on the Closing debtors.
Hence, Provision for bad debts = $Closing debtors \times \dfrac{Rate}{100}$
= $23000 \times \dfrac{5}{100}$
= 1150
The provision for bad debts has a Credit balance and the balance has to be Rs. 1150.
But, as given in the question the Provision for bad debts is showing a debit balance of Rs. 350.
Thus, the amount to be debited to the profit and loss account = 1150 + 350
= Rs. 1500
Thus, the correct option is B.

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 result of the business operation is reflected in ___________.

  1. The profit earned or loss suffered during a particular period

  2. The financial position on the business concern

  3. Total value of the assets

  4. Sum total of the value of liabilities
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Profit and Loss account summarizes the revenues and expenses of a business over a period to determine the net profit or loss. The other options relate to the Balance Sheet.

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 excess of operating expenses over operating revenues.

  1. True

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

Operating is the profit through the normal operations and activities of the business. Operating profit is the excess of operating revenue over operating expenses.