Tag: company final accounts

Questions Related to company final accounts

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 ____________.

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.1,950

  2. Rs. 1,500

  3. Rs. 650

  4. Rs. 550

Show answer
Correct Option: B
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.

Net result of the business operation is reflected in ___________.

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. 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

Show answer
Correct Option: A

Operating profit is the excess of operating expenses over operating revenues.

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. True

  2. False

Show answer
Correct Option: B
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. 

Sales - Purchase - Operating expenses 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

  2. gross profit

  3.  operating profit

  4. none of these

Show answer
Correct Option: C

Read the following which is taken from an income statement.

Rs.
Opening stock $50,000$
Sales $1,60,000$
Freight incurred $10,000$
Sales returns $10,000$
Gross profit on sales  $60,000$
Net loss for the year  $10,000$
Purchases $1,00,000$
Purchases returns $9,000$

The value of closing stock will be:

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. $Rs. 61,000$

  2. $Rs. 50,000$

  3. $Rs. 59,000$

  4. $Rs. 70,000$

Show answer
Correct Option: A

The loss on sale of old motor car is debited 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. profit and loss account

  2. motor car account

  3. depreciation account

  4. cash account

Show answer
Correct Option: A

The aim of preparing Profit and Loss Account is to find out__________.

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 or gross loss

  2. net profit or net loss

  3. financial position of the business

  4. all of these

Show answer
Correct Option: B

Operating profit stated as a subtotal on a companies income statement before all general and administrative 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. True

  2. False

Show answer
Correct Option: B
Explanation:

Operating profit is the profit earned through the normal operations and activities of the business. However, while calculating operating profit expenses which are of financial nature are not taken into consideration. Operating profit is the excess of operating revenue over operating expenses. Operating profit stated as a subtotal on a companies income statement after all general and administrative expenses.

Operating profit represents the spending power of the company with regard to revenues generated from ongoing operations. 

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. True

  2. False

Show answer
Correct Option: B
Explanation:

Operating profit represents the earning power of the company with regard to revenues generated from ongoing operations. Operating profit serves as an indicator to the business's potential profitability with all extraneous factor removed from the calculation.

Operating profit is also known as operating income, or earning before _______.

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. investment and income

  2. income and taxes

  3. interest and taxes

  4. Investment and taxes

Show answer
Correct Option: C
Explanation:

Operating profit is the profit earned through the normal operations and activities of the business. However, while calculating operating profit expenses which are of financial nature are not taken into consideration. Operating profit is the excess of operating revenue over operating expenses.