Tag: forms of statements of profit and loss

Questions Related to forms of statements of profit and loss

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. 

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

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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.