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InterviewSolution
This section includes InterviewSolutions, each offering curated multiple-choice questions to sharpen your knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
Capital Receipts and Revenue ReceiptsA. must be distinguishedB. need not be distinguishedC. may or may not be distinguishedD. None of these |
| Answer» Correct Answer - A | |
| 2. |
Sales are equal toA. Cost of Goods Sold + Gross ProfitB. Cost of Goods Sold - Gross ProfitC. Gross Profit - Cost of Goods SoldD. None of these |
| Answer» Correct Answer - A | |
| 3. |
Goodwill is aA. Fictitious AssetB. Tangible AssetC. Intangible AssetD. Expense |
| Answer» Correct Answer - C | |
| 4. |
Income tax paid by a sole trader is shownA. on the debit side of the Trading AccountB. on the debit side of the Profit and Loss AccountC. as deduction from capital in the Balance SheetD. as addition to capital in the Balance Sheet |
| Answer» Correct Answer - C | |
| 5. |
Give any three points of distinction between Capital Expenditure and Revenue Expenditure |
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Answer» Capital Expenditure :- 1) The expenditure incurred in acquiring a capital asset or improving the capacity of an existing one, resulting in the extension in its life years. 2)Capital Expenditure Shown in Income Statement & Balance Sheet 3) Benefit of Capital Expenditure is enjoying more than one year. Revenue Expenditure : 1) Expenses incurred in regulating day to day activities of the business. 2)Revenue Expenditure Shown in Income Statement 3) Benefit of Revenue Expenditure is enjoying Only in current accounting year |
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| 6. |
Briefly explain Current Assets |
| Answer» Current assets are short-term assets either in form of cash or a cash equivalent which can be liquidated within 12 months or within an accounting period. | |
| 7. |
Distinguish between Profit and Loss Account and Balance Sheet on any six basis. |
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Answer» Profit and loss account : 1) Meaning -Profit and loss account is the statement which shows the all indirect expenses incurred and indirect revenue earned during the particular period. 2) Object - It is prepared to know the Net profit or Loss of the business for a particular period. 3) Accounts Included -It includes only one type of accounts. i.e. Nominal account. 4) Gross Profit/ Loss -Profit and loss account does provide information about Gross Profit/loss for the year. Balance sheet : 1) Meaning - The Balance sheet is the statement showing the assets and Liabilities/capital of the business at the end particular accounting period. 2) Object - It is prepared to show the true or fair financial position of an entity. 3) Accounts Included - It includes only two type of accounts. i.e. Real and Personal accounts 4) Gross Profit/ Loss -Balance Sheet does not provide information about Gross Profit/loss for the year. |
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| 8. |
Distinguish between Current Assets and Fixed Assets |
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Answer» Current assets - It refers to those resources which a company owns for being traded and are held for not longer than one year. Fixed assets - Fixed assets are the long terms assets which are acquired by the entity for the purpose of continuing use, to generate income. |
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| 9. |
Write a short note on Contingent Liability |
| Answer» Contingent liability is a potential liability that may occur, depending on the outcome of an uncertain future event. A contingent liability is recorded in the accounting records if the contingency is likely and the amount of the liability can be reasonably estimated. | |
| 10. |
Expenses on overhauling a second-hand machine purchased isA. Revenue ExpenditureB. Capital ExpenditureC. Deferred Revenue ExpenditureD. None of these |
| Answer» Correct Answer - A | |
| 11. |
If Capital and Revenue Expenditure are not distinguishedA. net profit will not be correctB. financial position will not be correctC. both (a) and (b)D. None of these |
| Answer» Correct Answer - C | |
| 12. |
Revenue Expenditure is transferred toA. Profit and Loss AccountB. Trading and Profit and Loss AccountC. Balance SheetD. None of these |
| Answer» Correct Answer - B | |
| 13. |
Larger advertisement expenditure to introduce a new product isA. Capital ExpenditureB. Revenue ExpenditureC. Deferred Revenue ExpenditureD. None of these |
| Answer» Correct Answer - C | |
| 14. |
Explain the objects of preparing Profit and Loss Account |
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Answer» objects of preparing Profit and Loss Account :- 1) This account is prepared on the last day of an account year in order to determine the net result of the business. 2) It is second stage of the final accounts. 3) Only indirect expenses and indirect revenues are shown in this account. 4) It starts with the closing balance of the trading account i.e. gross profit or gross loss. 5) All items of revenue concerning current year - whether received in cash or not - and all items of expenses - whether paid in cash or not - are considered in this account. But no item relating to past or next year is included in it. |
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| 15. |
Why is Trading Account prepared ? Or What do we come to know by preparing the Trading Account? |
| Answer» Trading Account is prepared to know by prepared to know gross profit or gross loss during the accounting year | |
| 16. |
What is an Trading Account and why is it prepared ? |
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Answer» The account which is prepared to determine the gross profit or gross loss of a business concern is called trading account. Reason for preparing Trading A/c :- 1) Gross profit of a business is very important data, since all business expenses are met out of it. So the amount of gross profit should be adequate to meet the indirect expenses of a business concern. 2) The amount of net sales can be determined through this account. Gross sales can be ascertained from sales account in the ledger, but net sales cannot be so obtained. The true sales of a business is net sales - not gross sales. Net sales are determined by deducting sales returns from gross sales in trading account. 3) The success or failure of a business can be ascertained by comparing net sales of the current year with that of the last year. It should be noted that an increase in the amount of net sales of the current year over the last year may not be regarded as a sign of success, since sales may increase because of rise in price level. |
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| 17. |
Write a note on type of Assets with one example of each |
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Answer» 1. ON THE BASIS OF CONVERTIBILITY - One way of classification of assets is based on their easy convertibility into cash. According to this classification, total assets are classified either into Current Assets or Non Current Assets. a) CURRENT ASSETS -Assets which are easily convertible into cash like stock, inventory, marketable securities, short-term investments, fixed deposits, accrued incomes, bank balances, debtors, bills receivable, prepaid expenses etc. are classified as current assets. b) FIXED ASSETS -Fixed assets are of a fixed nature in the context that they are not readily convertible into cash. They require elaborate procedure and time for their sale and converted into cash. Land, building, plant, machinery, equipment, and furniture are some examples of fixed assets. 2. ON THE BASIS OF PHYSICAL EXISTENCE :Another classification of assets is based on their physical existence. According to this classification, an asset is either a tangible asset or intangible asset. a) TANGIBLE ASSETSTangible assets are those assets which we can touch, see and feel. All fixed assets are tangible. Moreover, some current assets like inventory and cash fall under the category of tangible assets too. b) INTANGIBLE ASSETSWe can not see, feel or touch Intangible assets physically. Some examples of intangible assets are goodwill, franchise agreements, patents, copyrights, brands, trademarks etc. 3. ON THE BASIS OF USAGE -According to a third way of classification, assets are either operating or non-operating. This classification is based on usage of the asset for business operation. Assets which are predominantly used for day-to-day business are classified as operating assets and other assets which are not used in operation are classified as non-operating. a) OPERATING ASSETS -Operating assets are those assets which are required for the current day-to-day transaction. In simple words, the assets that a company uses for producing a product or service are operating assets. These include cash, bank balance, inventory, plant, equipment etc. b) NON-OPERATING ASSETS -All assets which are of no use for daily business operations but are essential for the establishment of business and for its future needs are termed as non-operational. This could include some real estate purchased to earn from its appreciation or excess cash in the business, which is not used in an operation. |
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| 18. |
Prepar Trading Account from the transactions given below: Also pass the Journal entries |
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Answer» Correct Answer - Gross Profit - Rs 22,900 Depreciation is not accounted in the Trading Account |
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| 19. |
From the following information, prepare Trading Account for the year ended 31st March, 2019: Net Realisable Value (Market Value) of stock as on 31st March, 2019 was Rs 1,20,000 |
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Answer» Correct Answer - Gross Profit - Rs 50,000 Closing Stock is shown at Net Realisable Value, i.e., Market Value (Rs 1,20,000) Since Market Value is less than the Cost of Stock |
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| 20. |
From the following information, prepare Trading Account for the year ended 31st March, 2019: Net Realisable Value (Market Value) of stock as on 31st March, 2019 was Rs 1,20,000 |
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Answer» Correct Answer - Gross Profit - Rs 50,000 Closing Stock is shown at Net Realisable Value, i.e., Market Value (Rs 1,20,000) Since Market Value is less than the Cost of Stock |
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| 21. |
Purchases of machinery for production isA. Revenue ExpenditureB. Capital ExpenditureC. Defferred Revenue ExpenditureD. None of these |
| Answer» Correct Answer - B | |
| 22. |
Which of the following is correct ?A. Operating Profit = Net Profit + Non - Operating Epenses - Non -operating IncomeB. Operating Profit = Net Profit + Non-operating Expenses + Non-operating IncomeC. Operating Profit = Net Profit + Non-operating Expenses - Non-operating IncomeD. Opertin Profit = Net Profit - Non-operating Expenses + Non-operating Income |
| Answer» Correct Answer - C | |
| 23. |
Carriage Outward is shown inA. Trading AccountB. Profit and Loss AccountC. Balance SheetD. None of these |
| Answer» Correct Answer - B | |
| 24. |
Expenditure which increase the earning capacity of fixed asset is aA. Capital ExpenditureB. Revenue ExpenditureC. Deferred Revenue ExpenditureD. None of these |
| Answer» Correct Answer - A | |
| 25. |
How does Profit and Loss Account differ from Trading Account ? |
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Answer» Difference between trading account and profit and loss account: Trading Account :- 1) It is the first stage of final accounts. 2) It shows the gross result (gross profit or gross loss) of the business. 3) All direct expenses (expenses connected with purchase or production of goods) are considered in it 4) It does not start with the balance of any account. 5) Its balance (G.P or G.L) is transferred to profit and loss account Profit and Loss Account :- 1) It is the second stage of the final accounts. 2) It shows the net results (net profit or net loss) of the business. 3) All expenses connected with sales and administration (indirect expenses) of business are considered. 4) It always starts with the balance of a trading account (gross profit or gross loss). 5) Its balance (N.P or N.L) is transferred to capital account in balance sheet. |
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| 26. |
Outstanding Salaries is shown asA. an asset in the Balance SheetB. a liability in the Balance SheetC. adjusted in Profit and Loss AccountD. Both b and c |
| Answer» Correct Answer - D | |
| 27. |
Capital Receipts are shown inA. Balance sheetB. Trading AccountC. Trading and Profit and Loss AccountD. None of these |
| Answer» Correct Answer - A | |
| 28. |
Revenue Income is transferred toA. Profit and Loss AccountB. Trading and Profit and Loss AccountC. Balance SheetD. None of these |
| Answer» Correct Answer - B | |
| 29. |
Capital expenditure is included inA. Trading AccountB. Profit and Loss AccountC. Balance SheetD. Profit and Loss Appropriation Account |
| Answer» Correct Answer - C | |
| 30. |
Capital Expenditure and Revenue ExpenditureA. must be distinguishedB. need not be distinguishedC. may or may not be distinguishedD. None of these |
| Answer» Correct Answer - A | |
| 31. |
From the following figures, calculate Operating Profit |
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Answer» Correct Answer - Operating Profit - Rs 97,000 Operating Profit = Net Profit - Rent Received - Gain on Sale of Machine + Interest on Loan + Donation (Being Non - operating Expense) |
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| 32. |
From the following Trial Balance and Additional information of Mr. Gaurav, a proprietory, prepare Trading and Profit and Loss Account for the year ended 31st March, 2019 and Balance Sheet as at that date: Closing Stock at cost Rs 1,00,000 but its maket value is Rs 88,500 |
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Answer» Correct Answer - Gross Profit - Rs 1,06,700; Net Profit - Rs 65,100; Balance Sheet Total - Rs 3,03,200 Income Tax is drawings |
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| 33. |
From the following balances taken from the books of Hari & Co., prepare Trading and Profit and Loss Account for the year ended 31st March, 2019 and Balance Sheet as at the date: Closing Stock was value at Rs 1,82,100 |
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Answer» Correct Answer - Gross Profit - Rs 1,46,700; Net Profit - Rs 86,600; Balance Sheet Total - Rs 5,80,100 Investment is an asset. Thus, interest on Investments is an income |
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| 34. |
From the following balances, as on 31st March, 2019, prepare Trading and Profit and Loss Account and Balance Sheet: Closing Stock on 31 st March, 2019 valued at Rs 14,500 |
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Answer» Correct Answer - Gross Loss - Rs 5,000; Net Loss - Rs 18,500; Balance Sheet Total - Rs 88,500 1. Prepare Trial Balance first. 2. Life Insurance Premium is drawings |
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| 35. |
From the following Trial Balance and Additional information of Mr. Gaurav, a proprietory, prepare Trading and Profit and Loss Account for the year ended 31st March, 2019 and Balance Sheet as at that date: Closing Stock at cost Rs 1,00,000 but its maket value is Rs 88,500 |
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Answer» Correct Answer - Gross Profit - Rs 1,06,700; Net Profit - Rs 65,100; Balance Sheet Total - Rs 3,03,200 Income Tax is drawings |
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| 36. |
From the following balances taken from the books of Hari & Co., prepare Trading and Profit and Loss Account for the year ended 31st March, 2019 and Balance Sheet as at the date: Closing Stock was value at Rs 1,82,100 |
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Answer» Correct Answer - Gross Profit - Rs 1,46,700; Net Profit - Rs 86,600; Balance Sheet Total - Rs 5,80,100 Investment is an asset. Thus, interest on Investments is an income |
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| 37. |
Calculate Net Sales and Gross Profit from the following information: Cost of Goods Sold Rs 1,00,000, Gross Profit 20% on Sales |
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Answer» If Sales is Rs 100, Gross Profit = 20% on Sales = Rs 20 `:.` Cost will be Rs 80 (i.e., `Rs 100 - Rs 20`) If Cost of Goods Sold `= Rs 1,00,000`, Sales `= Rs 1,00,000 xx Rs 100//Rs 80 = Rs 1,25,000` Gross Profit = Sales - Cost of Goods Sold `= Rs 1,25,000 - Rs 1,00,000 = Rs 25,000` |
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| 38. |
State with reasons whether following are Capital or Revenue Expenditures: (i) Custom duty paid on import of a machinery. (ii) Wages paid in connection with the erection of a new machinery. (iii) Rs 5,000 spent on repainting the factory. (iv) Repairs for Rs 2,000 necessitated by negligence of an operator of machine. (v) Rs 10,000 paid for electricity bill |
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Answer» (i) Custom duty paid on import of a machinery is a Capital Expenditure because it is incurred for the acquisition of a new asset. (ii) Wages paid in connection with the erection of a new machinery is Capital Expenditure because it is in connection with the acquisition of new asset. (iii) Rs 5,000 spent on repainting the factory is Revenue Expendilure because it has been incurred to maintain the factory building. (iv) Repairs for Rs 2,000 necessitated by negligence of an operator of machine is Revenue Expenditure since it has not improved the asset (machine) in any way. (v) Rs 10,000 paid for electricity bill is Revenue Expendilure because it is a part of operating cost. |
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| 39. |
Calculate closing stock from the following details: Opening Stock `- Rs 20,000`, Cash Sales `- Rs 60,000`, Credit Sales `- Rs 40,000`, Purchase `- Rs 70,000` Rate of Gross Profit on Cost `33(1)/(3)%` |
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Answer» Total Sales = Cash Sales + Credit Sales = Rs 1,00,000 Let Cost be Rs 100, Gross Profit `= 33 (10)/(3)%` on Cost `= Rs 33(1)/(3)`, Sales `= Rs 133(1)/(3)` Gross Profit on Sales `= Rs 33(1)/(3) //Rs 133 (1)/(3) = (1)/(4)` Gross Profit `= Rs 1,00,000 xx (1)/(4) = Rs 25,000` Cost of Goods Sold = Sales - Gross Profit `= Rs 1,00,000 - Rs 25,000 = Rs 75,000` Cost of Goods Sold = Opening Stock + Purchases - Closing Stock `Rs 75,000 = Rs 20,000 + Rs 70,000 -` Closing Stock Closing Stock `= Rs 20,000 + Rs 70,000 - Rs 75,000 = Rs 15,000` |
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| 40. |
Which type of expenses are shown in Trading Account ?A. Direct ExpensesB. Indirect ExpensesC. Opening ExpensesD. Direct and Indirect Expenses |
| Answer» Correct Answer - A | |
| 41. |
Ascetain Cost of Goods Sold from the following `{:(,Rs,|,,Rs),("Indirect Expenses","15,200",,"Direct Expenses","18,600"),("Sales","1,20,000",,"Net Purchases","72,000"),("Return Inwards","12,000",,"Return Outwards","8,000"),("Opening Inventory","16,000",,"Closing Inventory ","28,000"):}` |
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Answer» Cost of Goods Sold = Opening Inventory + Purchases (Net) + Direct Expenses - Closing Inventory `= Rs 16,000 + Rs 72,000 + Rs 28,000 = Rs 78,600` |
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| 42. |
From the following, calculate Groos Profit and Cost of Goods Sold: Net Sales during the year Rs 6,00,000 Gross Profit: 25% on Cost |
| Answer» Gross Profit = Rs 1,20,000, Cost of Goods Sold = Rs 4,80,000 | |
| 43. |
Distinguish between a Balance Sheet and Trial Balance |
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Answer» Trial Balance : 1)Meaning - Trial Balance is the list of all balances of General Ledger Account. 2) Division - Debit and Credit columns 3) Objective - To check the arithmetical accuracy in recording and posting. 4) Preparation - At the end of each month, quarter, half year or financial year. Balance Sheet : 1) Meaning - The Balance sheet is the statement which shows the assets, equity and liabilities of the company. 2) Objective - To ascertain the financial position of the company on a particular date. 3) Preparation - At the end of the financial year. 4) Division - Assets and equity & liabilities heads |
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| 44. |
List the following assets in order of liquidity Sundry Debtors, Stock, Land and Building, Plant and Machinery, Furniture, Investments, Cash in Hand and Cash at Bank. |
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Answer» 1) Cash in Hand 2) Cash at Bank 3) Stock, 4) Sundry Debtors 5) Investments 6) Furniture 7) Plant and Machinery 8) Land and Building |
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| 45. |
Opening Stock Rs 15,000, Sales Rs 48,000, Carriage Inwards Rs 3,000, Sales Return Rs 3,000, Gross Profit Rs 18,000, Pruchases Rs 30,000, Purchases Return Rs 2,700. Calculate Closing Stock and Cost of Goods Sold |
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Answer» Net Sales = Sales - Sales Return `= Rs 48,000 - Rs 3,000 = Rs 45,000` Cost of Goods Sold = Net Sales - Gross Profit `= Rs 45,000 - Rs 18,000 = Rs 27,000` Cost of Goods Sold = Opening Stock + Purchaes - Purchases Return + Carriage Inwards - Closing Stock `Rs 27,000 = Rs 15,000 + Rs 30,000 - Rs 2,700 + Rs 3,000 -` Closing Stock Closing Stock `= Rs 45,300 - Rs 27,000 = Rs 18,300` |
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| 46. |
Operating Profit earned by Heer Mehta in 2005 - 06 was Rs 8,50,000. Its non-operating incomes were Rs 75,000 and non-operating expenses were Rs 1,87,500. Calculate Profit earned during the year. |
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Answer» Net Profit = Operating Profit + Non - operating Incomes - Non - operating Expenses `= Rs 8,50,000 + Rs 75,000 - Rs 1,87,500 = Rs 7,37,500` |
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| 47. |
When assets are listed in order of liquidity in a Balance Sheet in which order the following shall appear ? (a) Land and Building, (b) Cash in hand, (c) Machinery, (d) Bills Receivable |
| Answer» 1. Cash in Hand, 2. Bills Receiable, 3. Machinery, 4. Land and Building | |
| 48. |
A Profit and Loss Account is a point statement whereas a Balance Sheet is a periodic statement. Comment |
| Answer» A Profit and Loss Account is a Periodic statement and a Balance Sheet is a Point statement | |
| 49. |
Calculate closing stock and cost of goods sold: Opening Stock Rs 5,000, Sales Rs 16,000, Carriage Inwards Rs 1,000. Sales Return Rs 1,000, Gross Profit Rs 6,000, Pruchases Rs 10,000, Purchases Return Rs 900. |
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Answer» Cost of Goods Sold = Net Sales (i.e., Sales - Sales Return) - Gross Profit `= Rs 15,000 - Rs 6,000 = Rs 9,000` Cost of Goods Sold = Opening Stock + Net Purchases + Carriage Inwards - Closing Stock `Rs 9,000 = Rs 5,000 + Rs 9,100` (i.e., `Rs 10,000 - Rs 900`) `+ 1,00 -` Closing Stock Closing Stock = Rs 6,100 |
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| 50. |
Loss on sale of an old car is debited toA. Profit and Loss A/cB. Car A/cC. Dpreciation A/cD. None of these |
| Answer» Correct Answer - A | |