MCQs on Financial Statements

Financial statements are written documents that transmit the financial activities and conditions of an entity. Financial statements are usually meant to provide the financial data so that the investors, shareholders, creditors, and the government can utilise them to derive meaningful information about the status of the business or company.

Financial statements for trading concern normally comprise balance sheets, statements of retained earnings, cash flows and income statements. The statement is audited by government firms, accountants, agencies, etc. to make sure the certainty and for tax, financing or investing intentions.

Given below are essential MCQs on the Financial Statements to analyze your understanding of the topic. The answers are also given for your reference.

Financial Statements MCQs

Question 1

Which report gives a review on the profitability of a business?

(a) Statement of changes in equity

(b) Cash flow statement

(c) Balance sheet

(d) Income statement

Answer: d

Question 2

When assets are subtracted from liabilities it will be equal to?

(a) Capital

(b) Net income

(c) Working capital

(d) Goodwill

Answer: a

Question 3

P&L statement is also known as?

(a) Statement of earnings

(b) Statement of balance sheet

(c) Statement of operations

(d) Statement of income

Answer: d

Question 4

Which of the following options is not recorded in the Balance sheet?

(a) Cash

(b) Rent expenses

(c) Building

(d) Goodwill

Answer: b

Question 5

Current assets are also known as:

(a) Cash

(b) Assets

(c) Invested capital

(d) Working capital

Answer: d

Question 6

The main operation expenses of a business are termed as:

(a) Operating expenses

(b) Non-administration expense

(c) Selling expenses

(d) Administration expense

Answer: a

Question 7

Cash receipt received from the sales fixed assets are recorded under the head of:

(a) Other activities

(b) Investing activities

(c) Financing activities

(d) Operating activities

Answer: b

Question 8

A current asset that can be transferred into cash within three months is known as:

(a) Cash equivalent

(b) Intangible asset

(c) Operating asset

(d) Cash asset

Answer: a

Question 9

A method used in a comparative analysis of financial statement is:

(a) Returning analysis

(b) Common size analysis

(c) Preference analysis

(d) Graphical analysis

Answer: B

Question 10

Which statement shows the flow of cash and cash equivalents during the financial period?

(a) Statement of changes in equity

(b) Cash flow statement

(c) Balance sheet

(d) Income statement

Answer: b

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