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

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

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

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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. $Rs. 70,000$

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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

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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

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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

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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

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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

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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.

_______ is the income earned from the core operations of a business, excluding any financing or tax-related issues.

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. Operating loss

  3. Operating expenses

  4. Operating income

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Correct Option: A
Explanation:

Earnings before interest and taxes is a measure of a firm's profit that includes all incomes and expenses except interest expenses and income tax expenses. This is known as operating profit. Operating profit is the excess of operating revenue over operating expenses. Operating profit is the income earned from the core operations of a business, excluding any financing or tax-related issues.

The concept of _______ is used to investigate the profit-making potential of a business, excluding all extraneous factors.

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 loss

  2. operating profit

  3. operating expense

  4. None of the above

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Correct Option: B
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 the income earned from the core operations of a business, excluding any financing or tax-related issues. The concept of operating profit is used to investigate the profit-making potential of a business, excluding all extraneous factors.

If operating income is negative, a business will likely require additional outside funding to remain in operation.

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: A
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. If operating income is negative, a business will likely require additional outside funding to remain in operation.