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

Questions Related to meaning, need and format of profit and loss account

Operating profit is the _______ of operating revenue over operating expenses.

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

  1. excess

  2. deficit

  3. both a and b

  4. none of the above

Show answer
Correct Option: A

__________ is the gross inflow of economic benefits.

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. Assets

  2. Liabilities

  3. Income

  4. Expenses

Show answer
Correct Option: C

If the operating expenses exceed gross profit, the excess is referred to 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 income

  2. Operating loss

  3. Non-operating expenses

  4. Non-operating income

Show answer
Correct Option: B
Explanation:

This can be represented as:


Sales                                                                     120000
Less: Cost of Goods Sold                                     80000
                                                                             --------------- 
Gross Profit                                                          40000
Less: Operating Expenses                                  60000
                                                                             ---------------
Operating Loss                                                   (20000)
                                                                           ----------------

_____________ = net profit + non operating expenses - non operating incomes.

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. Capital profit

Show answer
Correct Option: A
Explanation:

Operating profit is defined as the profit earned by the business from its core business activity. There are certain item of non operating expense and non operating income which are adjusted from operating profit to find out the net profit of the business. 


For example, dividend received on investment is an example of non operating income and loss on sale of fixed asset is an example of non operating expenses. 

Hence, Operating Profit = Net profit + Non Operating Expenses - Non operating income.

Anju Pvt. Provides following information:
                               Rs.
          Fixed cost = 90,000
                 Sales = 3,00,000
                  Profit = 60,000
What is the margin of safety of the company?

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.60,000

  2. Rs 1,20,000

  3. Rs. 1,60,000

  4. Rs. 2,40,000

Show answer
Correct Option: B
Explanation:

Margin of safety = $\frac{Profit}{P/VRatio}$
                          = $\frac{60,000}{50%}$
                          = $\frac{60,000\times100}{50}$
                          = Rs.1,20,000

P/V Ratio = $\frac{F+P}{S}\times100$
                = $\frac{90,000+60,000}{3,00,000}\times100$
                = 50%.

Sales - Cost of goods sold = ______________.

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: A
Explanation:

Gross Profit is referred as the profit generated out of the core trading activity of the business. 

This can be calculated as: 

Sales - Cost of goods sold = Gross Profit

Cost of goods sold= Opening Stock + Purchases - Closing Stock 

Operating profit is __________ of operating revenue over 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. excess

  2. deficit

  3. balance

  4. none

Show answer
Correct Option: A
Explanation:

Operative profit means the profit generated through normal business operations. Excess of operating revenue over operating expenses is called operating profit. 


This can be shown below: 

Sales                                        Rs.100000           
Less: Cost of Goods Sold      Rs.  75000
                                              --------------------
Gross Profit                             Rs. 25000
Less: Operating Expenses     Rs. 15000
                                               -------------------
Operating Profit                      Rs. 10000
                                               ------------------

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.

Show answer
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

Show answer
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

Show answer
Correct Option: A