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

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

______ 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

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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

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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).

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

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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.