MCQs / Q&A

A. Drawings
B. Bad debts
C. Accrued expenses
D. Reserve for discount on Sundry Creditors
Profit and Loss Account is an income statement which depicts all incomes/gains and
expenses/losses during an accounting period. Drawings are neither an income nor an expense to be recorded in Profit and Loss Account. Thus A. is the correct answer. The items in other alternatives are either expenses or accrued expenses or probable income of discount on sundry creditors. The depreciation, bad debts and provision for doubtful debts and accrued expenses appear in the Profit and Loss Account and provision for income i.e., provision for discount on sundry creditors. Hence A. is the correct answer.

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

A profit and Loss Account is prepared for the period ending which shows the financial or
operating results of the concern for a period.

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

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

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

Director‘s remuneration shall not be deducted from net profit while calculating
managerial remuneration

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

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

Net Profit= Gross Profit- Administration and other expenses. Hence option B. is false.
Opening stock+ Purchases-Closing stock= Cost of material consumed not cost of sales.
Option (c ) is false.

A. Replacement cost
B. Current cost
C. Cost to acquire less accumulated amortization
D. Cost less expired portion
Prepaid expenses are the expenses which relate to the unexpired portion of the benefit
of the expense. Hence, these are valued on the Balance Sheet at the cost less expired portion

A. Debit of 800 to Trading Account and credit of 600 and 200 to insurance company and
Profit and Loss Account respectively
B. Deduct the 800 from closing stock in the Trading Account
C. Credit insurance company for 600
D. Debit of 600 and 200 to insurance company and Profit and Loss Account respectively and
credit of 800 to Trading Account

A. Adding 2,200 to closing stock
B. Deducting 1,800 from closing stock and deducting 2,200 each from debtors and sales
C. Adding 1,800 to closing stock and deducting 2,200 each from debtors and sales
D. Deducting 1,800 from debtors