Deck 36: Balance Sheet and Profit Loss Account

Question 1

Prepaid expenses are valued on the Balance Sheet at

A)Replacement cost
B)Current cost
C)Cost to acquire less accumulated amortization
D)Cost less expired portion

Answer 1

Cost less expired portion

Question 2

Which of the following relationships is/are false?

A)Net Profit = Gross Profit - Administration and Other expenses
B)Net Profit = Gross Profit + Administration expenses and Other expenses
C)Opening Stock + Purchases - Closing Stock = Cost of Sales
D)Both (b) and (c) above

Answer 2

Both (b) and (c) above

Question 3

Gross Profit is equal to

A)Sales - Cost of goods sold .
B)Sales - Closing Stock + Purchases
C)Opening Stock + Purchases - Closing Stock .
D)None of the above

Answer 3

Sales - Cost of goods sold .

Question 4

Which of the following shall not be deducted from net profit while calculating managerial remuneration?

A)Loss on sale of undertaking
B)Debts considered bad and written off
C)Liability arising from a breach of contract
D)Director's remuneration

Question 5

Which of the following equations is correct?

A)Gross Profit+ Sales+ Direct expenses+ Purchases+ Closing stock = Opening stock
B)Gross Profit+ Sales+ Direct expenses+ Purchases- Closing stock = Opening Stock
C)Gross Profit + Opening Stock + Direct expenses + Purchases- Closing stock = Sales
D)Gross Profit - Opening Stock + Direct expenses + Purchases +Closing stock = Sales

Question 6

Which of the following is not true with regard to preparation of Profit & Loss Account?

A)Profit & Loss Account is prepared for a certain period and hence it is an interim statement
B)Profit & Loss Account does not disclose the effect of non-financial items
C)Net Profits are ascertained on the basis of current costs
D)Net Profits as disclosed by P&L Account is not absolute

Question 7

The Profit and Loss Account shows the

A)Financial results of the concern for a period
B)Financial position of the concern on a particular date
C)Financial results of the concern on a particular date
D)Cost of goods sold during the period

Question 8

Which of the following statements is true?

A)Provision for doubtful debts represents the amount that cannot be collected
B)Cash balance on hand shows whether the business has earned Profit or Loss
C)Free samples received are business gains
D)The WDV of an asset depreciated on the reducing balance method can never become zero

Question 9

Cash Profit is

A)Net profit - Non-trading Profit - Depreciation and provision
B)Gross Profit - Non-trading Profit + Depreciation and provision
C)Net Profit + Depreciation and provision
D)Gross Profit - Operational expenses

Question 10

Which of the following will not appear in Profit and Loss Account of a business?

A)Drawings
B)Bad debts
C)Accrued expenses
D)Reserve for discount on Sundry Creditors

Question 11

Which of the following is not a financial statement?

A)Profit and Loss Account
B)Balance Sheet
C)Funds Flow Statement
D)Trial Balance

Question 12

If unexpired insurance appears in the Trial Balance, it should be

A)Credited to the Profit & Loss Account
B)Debited to the Profit & Loss Account
C)Shown on the liabilities side of the Balance Sheet
D)Shown on the assets side of the Balance Sheet

Question 13

Which of the following are/is not a fixed asset?

A)Stock .
B)Vehicle .
C)Fixed deposit in bank .
D)Both (a) and (c) above

Question 14

Tax deducted at source appears in the Balance Sheet

A)On the assets side under current assets
B)On the assets side under loans and advances
C)On the liabilities side under current liabilities
D)On the liabilities side under provisions

Question 15

Which of the following statements is false?

A)Balance Sheet discloses financial position of the business
B)A person who owes to the business is called Debtor
C)Decrease in the value of the asset could decrease the value of a liability
D)Assets are to be shown in the Balance Sheet at the realizable value

Question 16

Which of the following statements is true?

A)The balance of the goods account shows the value of stock in hand.
B)Balancing of all accounts must be done at the end of each day.
C)Assets which are to remain in business for continuous use and not meant for conversion into cash are fixed assets .
D)Balance Sheet discloses income position of the business

Question 17

The Balance Sheet gives information regarding the

A)Results of operations for a particular period
B)Financial position during a particular period
C)Profit earning capacity for a particular period
D)Financial position as on a particular date

Question 18

Which of the following accounts appear(s) in the Balance Sheet of a business?
i. Stock at the end of the financial year
ii. Stock at the beginning of the financial year
iii. Drawings iv. Prepaid Rent
v. Interest received but not yet earned

A)Only (i) above
B)Only (iii) above
C)Both (i)and (iii) above
D)(i), (iii), (iv) and (v) above

Question 19

Which of the following is not an intangible asset?

A)Trade mark
B)Franchise
C)Accounts Receivable
D)Secret Profit

Question 20

Which of the following is a current liability?

A)Prepaid expenses
B)Trademark
C)Discount on issue of shares
D)Outstanding Salaries

Question 21

Based on which of the following concepts, is Share Capital Account shown on the liabilities side of a Balance Sheet?

A)Business entity concept
B)Money measurement concept
C)Going concern concept
D)Matching concept

Question 22

Which of the following is not a contingent liability?

A)Debts included in Sundry Debtors which are doubtful in nature
B)Uncalled liability on partly paid shares
C)Claims against the company not acknowledged as debts
D)Arrears of fixed cumulative dividend

Question 23

Which of the following are current assets of a business?
i. Income received in advance
ii. Stock
Iii. Debtors
iv. Pre-paid expenses
v. Accrued income

A)Both (i) and (iv) above
B)Both (ii) and (iii) above
C)(i),(ii) and (iii) above
D)(ii),(iii),(iv) and (v) above

Question 24

Which of the following statements is true?

A)Bad Debts Recovered Account is transferred to Sundry Debtors Account
B)Bill of exchange is drawn by the purchaser
C)Trial Balance establishes the arithmetical accuracy of the accounting records
D)A well maintained asset need not be depreciated