The financial statement consist of

1

(a)

Trial balance

(b)

Profit and loss account

(c)

Balance sheet

(d)

(i)& (iii)

(e)

(ii) & (iii)

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

1

(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

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

1

(a)

Normal transactions

(b)

Abnormal items

(c)

Expenses of a purely financial nature

(d)

(ii)& (iii)

(e)

(i)& (ill)

Which of the following is correct

1

(a)

Operating profit = Operating profit - Nonoperating expenses - Non-operating incomes

(b)

Operating profit = Net profit + Non-operating Expenses + Non-operating incomes

(c)

Operating profit = Net profit + Non-operating expenses - Non-operating incomes

(d)

Operating profit = Net profit - Non-operating expenses + Non-operating incomes

Gross profit is total revenue.

1

(a) True

(b) False

In trading and profit and loss account, opening stock appears on the debit side because it forms the part of the cost of sales for the current accounting year.

1

(a) False

(b) True

Rent, rates and taxes is an example of direct expenses

1

(a) False

(b) True

If the total of the credit side of the profit and loss account is more than the total of the debit side, the difference is the net profit

1

(a) False

(b) True

Define financial statements.

1

(a)

Financial statements may be defined as the reports prepared to present a periodical review of financial performance and the financial position of a business enterprise.

What are two basic financial statements?

1

(a)

(i) Income Statement or Profit and Loss Account.
(ii) Position Statement or Balance Sheet

3. Mention two methods of presentation of financial statements.

1

(a)

(i) Horizontal form.
(ii)Verticalform

"T" form presentation of financial statements are known as Horizontal form or Vertical form.

1

(a)

Horizontal form.

What is the primary objective of financial statement?

1

(a)

To provide necessary information for decision making.

What is the use of financial statements for Potential Investors?

1

(a)

Potential investors use the financial statements to ascertain future prospects of the firm on the basis of past and current performance of the firm.

What is the use of financial statements for employees and trade unions?

1

(a)

To claim increase in wages, bonus and other benefit.