Tag: company final accounts

Questions Related to company final accounts

Select the most appropriate alternative from those given below:
Credit balance of 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. Gross Profit

  2. Gross Loss

  3. Net Profit

  4. Net Loss

Show answer
Correct Option: C
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
                                            ---------------                                                ------------------

An account to which the balance in depreciation account is transferred is _____________ .

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. Trading A/c

  2. Profit and Loss A/c

  3. Depreciation A/c

  4. Fixed assets A/c

Show answer
Correct Option: B

Expenses which are incurred to operate the business smoothly and efficiently are 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. operating expenses

  2. manufacturing expenses

  3. trading expenses

  4. financial expenses

Show answer
Correct Option: A
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. 

______ is (are) an example of operating expenses.

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. General administration expenses

  2. Selling and marketing expenses

  3. Financial charges

  4. All the three

Show answer
Correct Option: D
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.

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

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 from sale of assets

  2. Dividend

  3. Refund of income-tax

  4. All the three

Show answer
Correct Option: D
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.

Items of business operations does not include _________.

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. interest earned

  2. raw material expenses

  3. sales return

  4. depreciation on plant and machinery

Show answer
Correct Option: A

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

  2. Rs. 19,000

  3. Rs. 18,500

  4. Rs. 18,000

Show answer
Correct Option: A
Explanation:

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

Formula of Operating profit is equal to ___________.

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 + 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

Show answer
Correct Option: A
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.

Excess of gross profit over operating expenses is 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. operating profit

  2. gross profit

  3. net profit

  4. after tax profit

Show answer
Correct Option: A
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.

While calculating _______, the incomes and expenses of a purely financial nature are not taken into 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. Net profit

  2. Operating profit

  3. Net loss

  4. Operating loss

Show answer
Correct Option: B
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).