MCQs on Profit and Loss

The Profit and Loss Account, or Income Statement helps ascertain the net profit and loss from a firm’s operations within an accounting period. The gross profit or loss from the trading account is transferred to this account. This account summarises the day-to-day revenue and expense items incurred in the running of a business.

Below is a list of multiple-choice questions and answers on Profit and Loss to help students understand the topic better.

  1. The statements prepared to indicate the profit and loss, and financial position of a business are called _______.
    1. Trial balances
    2. Financial statements
    3. Bank reconciliation statements
    4. All of the above

    2. Answer: b

  2. Profit and loss account shows the ________.
    1. Profit earned or loss suffered by the business
    2. Total capital employed
    3. Profit and loss through the sale of assets
    4. None of the above

    3. Answer: a

  3. Expenses related to the sale of goods are shown in the _______.
    1. Trading account
    2. Trading profit and loss account
    3. Balance sheet
    4. Profit and loss account

    4. Answer: d

  4. The credit side of a profit and loss account records _______.
    1. Indirect income
    2. Indirect expenses
    3. Direct income
    4. Direct expenses

    5. Answer: a

  5. Revenue expenditure is recorded in the _______.
    1. Trading account
    2. Profit and loss account
    3. Balance sheet
    4. None of the above

    6. Answer: b

  6. Loss on sale of an old car is debited to the __________.
    1. Car account
    2. Profit and loss account
    3. Depreciation account
    4. None of the above

    7. Answer: b

  7. The profit and loss account reveals the ___________.
    1. Cost of goods sold during a particular period
    2. The financial results of a business during a particular date
    3. The financial position of the business for a period
    4. The financial results of the business for a period

    8. Answer: d

  8. Excess of debit in the profit and loss account is known as_______.
    1. Gross loss
    2. Gross profit
    3. Net loss
    4. Net profit

    9. Answer: c

  9. Profit and loss account is also known as _______.
    1. Statement of earnings
    2. Statement of income
    3. Statement of operations
    4. None of the above

    10. Answer: b

  10. A company that manufactures cars is preparing its profit and loss account. Under which heading will it include production labour costs?
    1. Cost of sales
    2. Distribution costs
    3. Interest payable and similar charges
    4. Administrative expenses

    11. Answer: a

  11. Net loss in a profit and loss account should be _______ in the balance sheet.
    1. Added to liabilities
    2. Deducted from liabilities
    3. Added to capital
    4. Deducted from capital

    12. Answer: d

  12. The provision for bad debts is created by _______ to the profit and loss account.
    1. Deducting
    2. Adding
    3. Debiting
    4. Crediting

    13. Answer: c

  13. Which of the following are included in the profit and loss account?
    1. Depreciation
    2. Wages and salaries
    3. Freight and carriage on sales
    4. All of the above

    14. Answer: d

  14. The term financial statement covers _______.
    1. Balance sheet
    2. Posting
    3. Entry
    4. None of the above

    15. Answer: b

  15. The _________ is a statement that shows the financial status of a company at any given time.
    1. Balance sheet
    2. Trading account
    3. Profit and loss account
    4. Both a and c

    16. Answer: d

  16. Which of the following items gets recorded on the credit side of a profit and loss account?
    1. Discount received
    2. Profit on sale of an asset
    3. Dividend on shares
    4. All of the above

    17. Answer: d

  17. The balance from the profit and loss account is transferred to the ________.
    1. Balance sheet
    2. Trial balance
    3. Cash flow statement
    4. None of the above

    18. Answer: a

  18. Excess of credit in the profit and loss account is known as_______.
    1. Gross profit
    2. Gross loss
    3. Net profit
    4. Net loss

    19. Answer: c

  19. Capital Expenditure is a part of ___________.
    1. Balance sheet
    2. Trading account
    3. Profit and loss account
    4. Trial balance

    20. Answer: a

  20. Profit and Loss account is prepared for a year by following the _________.
    1. Periodicity concept
    2. Going concern concept
    3. Cost concept
    4. Consistency concept

    21. Answer: b

Also See:

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