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CBSE Questions for Class 11 Commerce Accountancy Financial Statements 1 Quiz 3 - MCQExams.com
CBSE
Class 11 Commerce Accountancy
Financial Statements 1
Quiz 3
Operating profit is the profit a business earns from the business through the _________.
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0%
Operations
0%
Activities
0%
Both
0%
None
Explanation
Operating Profit is the profit which a business Earns through main business Activities of the business.
The money earned from the core business is known as operating profit.
The formula for calculating the Operating profit is
Operating Profit = Gross Profit – Operating Expenses – Depreciation – Amortization.
or
Operating Profit =
Net Profit + Interest Expenses + Taxes
Which of the following items are not considered while calculating operating profit?
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0%
Finance expenses.
0%
Non-Operating expenses.
0%
Appropriations.
0%
All of the above.
EBIT stands for ____________.
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0%
Earning Before Interest and Tax
0%
Equity Before Interest and tax
0%
Earning Before Insurance and tax
0%
None
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.
______________ is a good indicator of how well the business activities are being managed.
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0%
Operating Profit
0%
Net Profit
0%
Both
0%
None
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 indicates the earning from the core business operations. Its an indicator of how well a business operations are being managed.
Interest and taxes are ___________ from operating profit to find out the net profit.
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0%
added
0%
deducted
0%
no effect
0%
none
___________ is finance expense.
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0%
Salary
0%
Rent
0%
Interest on loan
0%
Advertisement
Sales - Cost of goods sold = ______________.
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0%
Gross Profit
0%
Gross Loss
0%
Net Profit
0%
Net Loss
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 also known as ____________.
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0%
EBIT
0%
EAIT
0%
NPAT
0%
None
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)
Net Profit = 50000
interest on bank loan = 500
bad debts = 1000
ascertain operating profit.
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0%
48000
0%
48500
0%
49500
0%
49000
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. Interest on bank loan is non operating activity.
Net Profit Rs.50000
Less: Bad Debts Rs. 1000
-------------------
Operating Profit Rs.49000
-------------------
__________ is non operating expense.
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0%
Loss on sale of Asset
0%
Bad debts
0%
Carriage
0%
Royalty
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.
Which of the following is correct?
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0%
Operating profit = Operating profit - Non-operating expenses - Non-operating incomes
0%
Operating profit = Net profit + Non-operating expenses + Non-operating incomes
0%
Operating profit = Net profit + Non-operating expenses - Non-operating incomes
0%
Operating profit = Net profit - Non-operating expenses + Non-operating incomes
Explanation
Operating profit is the profit earned through the operating activities of the firm. This has been calculated as:
Gross Profit - Operating expenses = Operating Profit
Net Profit = Operating Profit - Non Operating Expenses + Non Operating Income.
Else,
Operating Profit = Net Profit + Non Operating Expense - Non Operating income
If the rent of one month is still to be paid, the adjustment entry will be_________________________.
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0%
debit outstanding rent account and credit rent account
0%
debit profit and loss account and credit rent account
0%
debit rent account and credit profit and loss account
0%
debit rent account and credit outstanding rent account
Explanation
There are various adjustment entries need to be passed at the end of financial year as there are certain expenses which are either paid in advance or not paid.
Outstanding expenses are those expenses which are due but not paid but services are already provided for. This is actually a liability of the business against the services taken.
In such cases, respective expenses account to be debited and outstanding expenses liability account to be credited.
Accounting entry will be as under:
Rent A/c Dr.
To Outstanding Rent A/c.
Amount which is not recoverable from customer is known as ___________.
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0%
debts
0%
debtor
0%
bad debts
0%
doubtful debts
Explanation
Bad debts are those items of charge on the profits of the company,
that indicate the sums of money that could not be recovered from a debtor, during the year.
These are the trade receivables that will not be collected.
The useful life of an asset cannot be longer than the useful life specified in _____________.
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0%
schedule VI
0%
part C to
schedule
II
0%
part B to
schedule
III
0%
part A to
schedule
II
Explanation
The useful life of an asset shall not be longer than the useful life specified in Part 'C' of schedule II & the residual value of an asset shall not be more than 5% of the original cost of the asset.
Therefore, B is the correct option.
While calculating operating profit, the following are not taken into account:
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0%
Normal transactions
0%
Direct expenses
0%
Expenses of purely financial nature
0%
Both (ii) and (iii)
0%
Both (i) and (iii)
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.
Expense of purely financial nature are not taken in to account while calculating the operating profit.
Rent, rates and taxes is an example of direct expenses.
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0%
True
0%
False
Explanation
Expenses are classified in to direct expenses and indirect expenses.
Expenses which are directly connected with the manufacturing or trading activity of the business are called direct expenses. Examples are direct material, direct wages, freight inward etc.
Expenses which are not directly connected with the manufacturing or trading activity are called as indirect expenses. These are essential expenses but does not have any direct connect with trading of the business. Examples are Rent, Rates & Taxes, Salaries.
Financial statements are part of ______.
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0%
Accounting
0%
Book-keeping
0%
Cost accounting
0%
H.R accounting
Explanation
When transaction is recorded in books of the business, it is called book keeping. As we understand, book keeping does not give any final output for understanding the business. Once financial statements are prepared, that gives the a real picture of any business. Preparation of financial statement is part of accounting process.
Net income equals _________________.
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0%
Assets-liabilities
0%
Revenue-expenses
0%
Cash-in-cash out
0%
Liabilities-assets
Explanation
Profit & Loss account of the firm having two sides. On the one side all the expenses are listed and on other side all revenues are listed down. The difference of revenue minus expenses is called as net income.
XYZ Associates is not maintaining full-fledged accounts on Double entry system basis. From the following details estimates the capital of the firm as on
31
−
3
−
2014
31
−
3
−
2014
.
Capital as on
1
−
04
−
2013
1
−
04
−
2013
Rs.
80
,
000
80
,
000
Capital added during the year Rs.
20
,
000
20
,
000
Drawing during the year Rs.
35
,
000
35
,
000
Profit credit to the capital A/c Rs.
60
,
000
60
,
000
Report Question
0%
Rs.
1
,
50
,
000
1
,
50
,
000
0%
Rs.
1
,
25
,
000
1
,
25
,
000
0%
Rs.
1
,
75
,
000
1
,
75
,
000
0%
Rs.
1
,
45
,
000
1
,
45
,
000
Explanation
Beg. capital = Rs. 80,000; Added capital = Rs. 20,000; Drawing = Rs. 35,000; Profit = Rs. 60,000;
Ending Capital = ?
Ending capital
=
Profit
+
Beg. capital + Added capital
-
Drawing
Ending capital
= Rs. 60,000
+
Rs. 80,000 + Rs. 20,000
-
Rs. 35,000
Ending capital
= Rs. 1,25,000
______ is (are) an example of operating expenses.
Report Question
0%
General administration expenses
0%
Selling and marketing expenses
0%
Financial charges
0%
All the three
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 the most important phase of accounting cycle.
Report Question
0%
Bank Reconciliation Statement
0%
Preparing financial statement
0%
Trial balance
0%
Ledger Posting
Explanation
There are eight steps in accounting cycle they are: Journal entries, Posting, trial balance, worksheet, adjusting journal entries, financial statements, and closing of the books. Preparing financial statement is the most important phase of accounting cycle.
Select the most appropriate alternative from those given below:
An amount which is irrecoverable is called ________ .
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0%
Bad debts
0%
R.D.D
0%
good debts
0%
doubtful debts
Explanation
During the business operations, goods are sold on credit basis also. These are called sundry debtors and part of current assets.
There are few people , who in turn some time not pay the amount or party paid. Hence some amount is kept as unrecoverable which is called bad debts.
Expenses that are incurred to operate the business smoothly and efficiently are known as ________.
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0%
Operating Expenses
0%
Manufacturing Expenses
0%
Trading Expenses
0%
Financial Expenses
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.
Major repair on a second hand plant purchased is debited to _________.
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0%
Repairs and Maintenance A/c
0%
Purchase A/c
0%
Plant A/c
0%
Miscellaneous Expenses A/c
Explanation
Normal repairs and maintenance of plant is a revenue expenditure and to be debited to the repairs and maintenance account.
Any major repair on a second hand plant purchase is considered as capital expenditure as it is incurred to increase the productivity of the plant. Hence this has to be debited to Plant Account.
Which of these is not included in the term "factory building"?
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0%
Offices
0%
Godowns
0%
Officers and employees quarters
0%
All of the above
Explanation
Factory Building includes only building where the plant & machineries are installed. Factory building consist of building where the production activities are carried out.
Below are not part of factory building:
Offices
Godowns
Officers and employees quarters.
Inventory that is ready for sale is called_________.
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0%
raw materials
0%
work in process
0%
finished goods
0%
store supplies
Explanation
Inventory may be classified as:
Inventory of Raw Material
Inventory of Finished Goods
Work In Progress
Raw material is converted in to finished goods by spending conversion cost.
Finished goods is that inventory which is ready for sale.
Find the cost of goods sold from the following details:
Purchases Rs. 20,000
Closing stock Rs. 5,000.
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0%
R
s
.
15
,
000
R
s
.
15
,
000
0%
R
s
.
25
,
000
R
s
.
25
,
000
0%
R
s
.
20
,
000
R
s
.
20
,
000
0%
R
s
.
22
,
500
R
s
.
22
,
500
Explanation
Purchases = Cost of goods + Closing stock
R
s
.
20
,
000
R
s
.
20
,
000
=
Cost of goods sold +
R
s
.
5
,
000
R
s
.
5
,
000
Cost of goods sold=
R
s
.
20
,
000
R
s
.
20
,
000
-
R
s
.
5
,
000
R
s
.
5
,
000
Cost of goods sold =
R
s
.
15
,
000
R
s
.
15
,
000
Which of the following item of cost is not a part of inventory?
Report Question
0%
Storage expenses
0%
Normal wastage
0%
Inward freight
0%
Custom duties
Explanation
The
costs
that are excluded from
inventory
include: abnormal
costs
that are incurred as a result of material waste, labor or other production conversion inputs,
storage costs
(unless required as
part
of the production process), and all administrative overhead and selling
costs.
Hence, storage expenses are not a part of inventory.
Wages incurred on installation of an asset is shown in ___________.
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0%
trading a/c
0%
profit and loss a/c
0%
concerned assets a/c
0%
amortized
Which of these is not a part of inventory ?
Report Question
0%
Work-in-progress
0%
Stores and spare parts
0%
Loose tools
0%
Office equipment
Explanation
Inventory may be classified as:
Inventory of Raw Material
Inventory of Finished Goods
Work In Progress
Office equipment is a fixed assets and to be shown under the heading Fixed Assets.
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Practice Class 11 Commerce Accountancy Quiz Questions and Answers
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