# ACCOUNTANCY FOR CLASS 11 CHAPTER 9 FINANCIAL STATEMENTS 1 MCQS ALONG WITH ANSWERS

Free CBSE Accountancy Multiple Choice Questions for Class 11 along with answers Chapter 9: Financial Statements 1. Accountancy MCQs for Class 11 chapter-wise with answers are prepared based on the current exam pattern. Students can tackle MCQs with answers to realise their spadework level.

1. While calculating operating profit, the _______ are not taken into account.

(a) Normal transactions

(b) Abnormal items

(c) Expenses of a purely financial nature

(d) (b) and (c)

(e) (a) and (c)

Answer: (c) Expenses of a purely financial nature

2. Goodwill is a _______.

(a) Fixed Asset

(b) Current Asset

(c) Fictitious Asset

(d) None of the above

3. Choose the correct chronological order of ascertainment of the following profits from the profit and loss account:

(a) Operating Profit, Net Profit, Gross Profit

(b) Operating Profit, Gross Profit, Net Profit

(c) Gross Profit, Operating Profit, Net Profit

(d) Gross Profit, Net Profit, Operating Profit

Answer: (c) Gross Profit, Operating Profit, Net Profit

(a) Gross profit

(b) Net profit

(c) Net loss

(d) Gross profit or Gross loss

Answer: (d) Gross profit or Gross loss

5. Which of the following is correct?

(a) Operating profit = Operating profit â€“ Non-operating expenses â€“ Non-operating incomes

(b) Operating profit = Net profit + Non-operating expenses + Non-operating incomes

(c) Operating profit = Net profit + Non-operating expenses â€“ Non-operating incomes

(d) Operating profit = Net profit â€“ Non-operating expenses + Non-operating incomes

Answer: (c) Operating profit = Net profit + Non-operating expenses â€“ Non-operating incomes

6. Profit and loss account disclose _____.

(a) Gross profit

(b) Gross profit or Gross loss

(c) Gross loss

(d) None of the above

Answer: (b) Gross profit or Gross loss

7. Direct Expenses are entered in _____.

(b) Profit and Loss Account

(c) Balance Sheet

(d) None of the above

8. Which of the following items is included in the adjustment of net income to obtain cash flow from operating activities?

(a) Depreciation expense for the period

(b) The change in deferred taxes

(c) The amount by which equity income is recognised exceeds cash received

(d) All of the above

Answer: (d) All of the above

9. Profit earned through normal activities of the business is _______.

(a) Operating profit

(b) Net profit

(c) Gross profit

(d) Manufacturing profit

10. What is a limitation common to both the current and quick ratio?

(a) Accounts receivable may not be truly liquid

(b) Inventories may not be truly liquid

(c) Marketable securities are not liquid

(d) Prepaid expenses are potential sources of cash

Answer: (a) Accounts receivable may not be truly liquid

11. What does an increasing collection period for accounts receivable suggest about a firmâ€™s credit policy?

(a) The credit policy is too restrictive

(b) The firm is probably losing qualified customers

(c) The credit policy may be too lenient

(d) The collection period has no relationship to a firmâ€™s credit policy

Answer: (c) The credit policy may be too lenient

12. Subtracting all expenses from revenues yields ________.

(a) Net profit or loss

(b) Carrying value

(c) Long-term assets

(d) Net liabilities

Answer: (a) Net profit or loss

13. The primary source of revenue for a wholesaler is _________.

(a) Investment income

(b) Service fees

(c) The sale of merchandise

(d) The sale of fixed assets the company owns

Answer: (c) The sale of merchandise

14. What information can be gained from sources such as Industry Norms and Key Business Ratios, Annual Statement Studies, Analystâ€™s Handbook, and Industry Surveys?

(a) The general economic condition

(b) Forecasts of earnings

(c) Elaboration of financial statement disclosures

(d) A companyâ€™s relative position within its industry

Answer: (d) A companyâ€™s relative position within its industry

15. Which ratio or ratios measure the overall efficiency of the firm in managing its investment in assets and in generating a return to shareholders?

(a) Gross profit margin and net profit margin

(b) Return on investment

(c) Total asset turnover and operating profit margin

(d) Return on investment and return on equity

Answer: (d) Return on investment and return on equity

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