Tag: company final accounts

Questions Related to company final accounts

Which of the following items are not considered while calculating operating profit?

commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

  1. Finance expenses.

  2. Non-Operating expenses.

  3. Appropriations.

  4. All of the above.

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Correct Option: D

EBIT stands for ____________.

commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

  1. Earning Before Interest and Tax

  2. Equity Before Interest and tax

  3. Earning Before Insurance and tax

  4. None

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Correct Option: A
Explanation:

Earning before Interest and Tax is termed as "EBIT" in short. 


Earning before Interest and Tax means the situation where the interest paid and taxes are not considered while deducting the expenses from the income. 

Operating profit is the profit a business earns from the business through the _________.

commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

  1. operations

  2. activities

  3. both

  4. none

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Correct Option: A

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

commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

  1. added

  2. ignored

  3. deducted

  4. none

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Correct Option: A
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. 

Operating Profit is also known as ____________.

commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

  1. EBIT

  2. EAIT

  3. NPAT

  4. none

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Correct Option: A
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)

__________ is non operating expense.

commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

  1. Loss on sale of Asset

  2. Bad debts

  3. Carriage

  4. Royalty

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Correct Option: A
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. 

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

commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

  1. added

  2. deducted

  3. no effect

  4. none

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Correct Option: B

___________ is finance expense.

commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

  1. Salary

  2. Rent

  3. Interest on loan

  4. Advertisement

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Correct Option: C

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

commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

  1. Profit and Loss

  2. Trading

  3. Profit and Loss Appropriation

  4. None of these

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Correct Option: A
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. 

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

commercial studies company final accounts forms of statements of profit and loss operating profit (ebit) meaning, need and format of profit and loss account

  1. Net Profit

  2. Gross Profit

  3. Gross Loss

  4. Net Loss

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Correct Option: A
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.