MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO TRADING ACCOUNT/PROFIT AND LOSS ACCOUNT/ INCOME AND EXPENDITURE ACCOUNT
Which of the following is prepared to ascertain the result of trading activities?
A) Profit and Loss Account
B) Income and Expenditure Account
C) Trading Account
D) Balance Sheet
Answer: C) Trading Account
Which of the following accounts includes all expenses and losses?
A) Trading Account
B) Profit and Loss Account
C) Income and Expenditure Account
D) Balance Sheet
Answer: B) Profit and Loss Account
In which type of organization is the Income and Expenditure Account prepared?
A) Sole Proprietorship
B) Partnership Firm
C) Non-Profit Organization
D) Joint Stock Company
Answer: C) Non-Profit Organization
Which of the following accounts includes all incomes and gains?
A) Profit and Loss Account
B) Balance Sheet
C) Income and Expenditure Account
D) Trading Account
Answer: C) Income and Expenditure Account
Which account helps in determining the gross profit or gross loss of a business?
A) Profit and Loss Account
B) Balance Sheet
C) Income and Expenditure Account
D) Trading Account
Answer: D) Trading Account
Which of the following accounts is prepared at the end of the accounting period?
A) Trading Account
B) Balance Sheet
C) Income and Expenditure Account
D) All of the above
Answer: D) All of the above
Which account represents the financial position of a business on a particular date?
A) Trading Account
B) Balance Sheet
C) Profit and Loss Account
D) Income and Expenditure Account
Answer: B) Balance Sheet
Which account is prepared to determine the net profit or net loss of a business?
A) Trading Account
B) Income and Expenditure Account
C) Profit and Loss Account
D) None of the above
Answer: C) Profit and Loss Account
Which of the following statements is true regarding the Trading Account?
A) It includes all incomes and gains.
B) It includes all expenses and losses.
C) It helps in determining the net profit or net loss.
D) It represents the financial position of a business.
Answer: C) It helps in determining the net profit or net loss.
In which account are closing stock and opening stock recorded?
A) Trading Account
B) Profit and Loss Account
C) Income and Expenditure Account
D) Balance Sheet
Answer: A) Trading Account
Which of the following items would appear in the credit side of the Trading Account?
A) Sales Returns
B) Purchases Returns
C) Carriage Inwards
D) Carriage Outwards
Answer: A) Sales Returns
The primary purpose of preparing the Trading Account is to:
A) Determine the net profit or loss of the business
B) Calculate the gross profit or loss of the business
C) Ascertain the financial position of the business
D) Record all the transactions of the business
Answer: B) Calculate the gross profit or loss of the business
Which of the following accounts is also known as a nominal account?
A) Balance Sheet
B) Profit and Loss Account
C) Trading Account
D) Cash Book
Answer: B) Profit and Loss Account
The main difference between the Trading Account and the Profit and Loss Account is that:
A) Trading Account includes indirect expenses, while Profit and Loss Account includes direct expenses
B) Trading Account includes indirect incomes, while Profit and Loss Account includes direct incomes
C) Trading Account records revenue transactions, while Profit and Loss Account records capital transactions
D) Trading Account deals with transactions related to goods, while Profit and Loss Account deals with non-trading transactions
Answer: D) Trading Account deals with transactions related to goods, while Profit and Loss Account deals with non-trading transactions
Which of the following expenses is considered a direct expense?
A) Rent
B) Salaries
C) Carriage Inwards
D) Electricity Bill
Answer: C) Carriage Inwards
Which of the following items is usually deducted from the credit side of the Trading Account?
A) Sales
B) Opening Stock
C) Purchases
D) Carriage Outwards
Answer: B) Opening Stock
The Income and Expenditure Account is prepared on the basis of:
A) Cash Basis of Accounting
B) Accrual Basis of Accounting
C) Receipts and Payments Basis of Accounting
D) None of the above
Answer: B) Accrual Basis of Accounting
Which of the following represents a fictitious asset?
A) Debtors
B) Stock
C) Goodwill
D) Buildings
Answer: C) Goodwill
Which account reflects the profitability of a business for a specific period?
A) Trading Account
B) Balance Sheet
C) Profit and Loss Account
D) Cash Book
Answer: C) Profit and Loss Account
Closing stock appears in which part of the Trading Account?
A) Debit side
B) Credit side
C) It does not appear in the Trading Account
D) It appears in both debit and credit side
Answer: A) Debit side
Which of the following items is deducted from the debit side of the Trading Account?
A) Sales
B) Opening Stock
C) Purchases
D) Sales Returns
Answer: D) Sales Returns
Which of the following is not included in the calculation of gross profit?
A) Opening Stock
B) Purchases
C) Sales Returns
D) Direct Expenses
Answer: C) Sales Returns
Which of the following represents a liability?
A) Debtors
B) Stock
C) Creditors
D) Buildings
Answer: C) Creditors
Which of the following is recorded in the Profit and Loss Account?
A) Opening Stock
B) Sales
C) Fixed Assets
D) Capital
Answer: B) Sales
If the gross profit is Rs. 50,000, and operating expenses are Rs. 20,000, what is the net profit?
A) Rs. 30,000
B) Rs. 70,000
C) Rs. 20,000
D) Rs. 50,000
Answer: A) Rs. 30,000
Which of the following is a direct income?
A) Rent Received
B) Interest Paid
C) Salaries
D) Advertising Expenses
Answer: A) Rent Received
Which of the following is a contra revenue account?
A) Sales
B) Sales Returns
C) Purchases
D) Wages
Answer: B) Sales Returns
If gross profit is Rs. 80,000, and operating expenses are Rs. 30,000, what is the net profit?
A) Rs. 110,000
B) Rs. 50,000
C) Rs. 30,000
D) Rs. 80,000
Answer: B) Rs. 50,000
Which of the following represents a personal account?
A) Rent Account
B) Machinery Account
C) Capital Account
D) Sales Account
Answer: C) Capital Account
If the closing stock is understated, what impact does it have on the profit?
A) Overstates profit
B) Understates profit
C) No impact on profit
D) Increases gross profit
Answer: B) Understates profit
Which of the following is not a revenue expenditure?
A) Salary Paid
B) Purchase of Machinery
C) Rent Paid
D) Advertisement Expenses
Answer: B) Purchase of Machinery
Which of the following represents a contra asset?
A) Bank Overdraft
B) Stock
C) Goodwill
D) Provision for Doubtful Debts
Answer: D) Provision for Doubtful Debts
If the net loss for the year is Rs. 10,000, what will be the effect on capital?
A) Increase by Rs. 10,000
B) Decrease by Rs. 10,000
C) No effect on capital
D) Increase by Rs. 20,000
Answer: B) Decrease by Rs. 10,000
Which of the following is a revenue receipt?
A) Sale of Machinery
B) Interest Received
C) Sale of Investments
D) Loan Taken
Answer: B) Interest Received
If gross loss is Rs. 20,000, and operating expenses are Rs. 10,000, what is the net loss?
A) Rs. 10,000
B) Rs. 30,000
C) Rs. 20,000
D) Rs. 0
Answer: B) Rs. 30,000
Which of the following is recorded in the Income and Expenditure Account?
A) Opening Stock
B) Salaries
C) Capital
D) Purchase of Machinery
Answer: B) Salaries
Which of the following is a capital receipt?
A) Rent Received
B) Sale of Investments
C) Interest Received
D) Loan Taken
Answer: D) Loan Taken
Which of the following items is added to the credit side of the Profit and Loss Account?
A) Sales Returns
B) Rent Paid
C) Discount Allowed
D) Salaries
Answer: C) Discount Allowed
Which of the following represents a fixed asset?
A) Debtors
B) Creditors
C) Buildings
D) Bank Overdraft
Answer: C) Buildings
If the gross profit ratio is 25% and the net sales are Rs. 1,00,000, what is the cost of goods sold?
A) Rs. 25,000
B) Rs. 75,000
C) Rs. 20,000
D) Rs. 80,000
Answer: B) Rs. 75,000
Which of the following represents an indirect expense?
A) Rent Paid
B) Sales
C) Interest Received
D) Sales Returns
Answer: A) Rent Paid
If the opening stock is Rs. 20,000, purchases are Rs. 50,000, and closing stock is Rs. 15,000, what is the cost of goods sold?
A) Rs. 55,000
B) Rs. 35,000
C) Rs. 70,000
D) Rs. 45,000
Answer: B) Rs. 35,000
Which of the following is an example of an operating expense?
A) Purchase of Machinery
B) Sale of Investments
C) Rent Paid
D) Interest Received
Answer: C) Rent Paid
In which part of the Profit and Loss Account would discounts allowed be recorded?
A) Debit side
B) Credit side
C) Trading Account
D) Balance Sheet
Answer: A) Debit side
Which of the following is a real account?
A) Rent Account
B) Salary Account
C) Capital Account
D) Advertising Expenses Account
Answer: C) Capital Account
If the gross profit ratio is 20% and the cost of goods sold is Rs. 80,000, what is the gross profit?
A) Rs. 20,000
B) Rs. 16,000
C) Rs. 64,000
D) Rs. 100,000
Answer: A) Rs. 20,000
Which of the following represents a revenue reserve?
A) General Reserve
B) Capital Reserve
C) Provision for Doubtful Debts
D) Accumulated Depreciation
Answer: A) General Reserve
If the net profit for the year is Rs. 50,000 and drawings are Rs. 10,000, what is the increase in capital?
A) Rs. 50,000
B) Rs. 40,000
C) Rs. 60,000
D) Rs. 10,000
Answer: B) Rs. 40,000
Which of the following is a revenue expenditure?
A) Purchase of Land
B) Payment of Dividend
C) Purchase of Machinery
D) Repair of Machinery
Answer: D) Repair of Machinery
If the gross profit is Rs. 40,000 and operating expenses are Rs. 15,000, what is the operating profit?
A) Rs. 55,000
B) Rs. 25,000
C) Rs. 40,000
D) Rs. 15,000
Answer: B) Rs. 25,000
