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MCQs WITH ANSWER OF COMPARATIVE INCOME/BALANCE SHEET & COMMON SIZE INCOME/BALANCE SHEET

 MCQs WITH ANSWER of Comparative Income/Balance Sheet and Common Size Income/Balance sheet 

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Here are  (MCQs) related to Common Size Income Statement, Common Size Balance Sheet, Comparative Income Statement, and Comparative Balance Sheet concepts in accounting, along with their answers:

1)Common Size Income Statement:

What does a Common Size Income Statement express in percentage terms?

a) Net income

b) Expenses

c) Each item as a percentage of total revenue

d) Each item as a percentage of total expenses

Answer: c

2)In a Common Size Income Statement, what is the base value used for calculating percentages?

a) Total revenue

b) Net income

c) Gross profit

d) Total expenses

Answer: a

3)Which financial statement helps in analyzing the relative proportion of expenses to total revenue?

a) Balance Sheet

b) Income Statement

c) Common Size Income Statement

d) Comparative Income Statement

Answer: c

4)Common Size Income Statements are useful for:

a) Comparing financial statements of different companies

b) Evaluating changes in expenses over time

c) Identifying the relationship between assets and liabilities

d) Calculating net income

Answer: b

5)In a Common Size Income Statement, if the percentage of cost of goods sold (COGS) increases, what might this indicate?

a) Higher profitability

b) Decreased efficiency

c) Lower revenue

d) Reduced expenses

Answer: b

,6)Common Size Balance Sheet:

A Common Size Balance Sheet expresses each item as a percentage of:

a) Total liabilities

b) Total assets

c) Total equity

d) Total revenue

Answer: b

7)What is the primary purpose of a Common Size Balance Sheet?

a) To compare companies' net income

b) To analyze changes in equity over time

c) To evaluate the proportion of assets and liabilities

d) To assess liquidity ratios

Answer: c

8)In a Common Size Balance Sheet, if the percentage of total liabilities increases, what could this imply?

a) Improved liquidity

b) Reduced debt

c) Higher financial risk

d) Increased profitability

Answer: c

9)Which statement helps identify the relative proportions of different asset and liability items?

a) Cash Flow Statement

b) Income Statement

c) Common Size Balance Sheet

d) Comparative Balance Sheet

Answer: c

10)Common Size Balance Sheets are particularly useful for:

a) Analyzing changes in owner's equity

b) Comparing financial statements of different industries

c) Assessing the growth of total assets

d) Evaluating the composition of assets and liabilities

Answer: d

11)Comparative Income Statement:

11. What does a Comparative Income Statement compare over multiple periods?

a) Total expenses

b) Total liabilities

c) Total revenue

d) Changes in income and expenses

Answer: d

12)In a Comparative Income Statement, what is typically presented side by side for analysis?

a) Income and expenses of different companies

b) Current year and prior year financial data

c) Budgeted and actual figures

d) Common size percentages

Answer: b

13)Comparative Income Statements help in:

a) Identifying the percentage of expenses to revenue

b) Assessing the liquidity of a company

c) Analyzing trends in income and expenses

d) Calculating net profit margin

Answer: c

14)If a company's net income has decreased in the current year compared to the previous year, what might be a possible explanation?

a) Higher revenue

b) Reduced expenses

c) Lower cost of goods sold

d) Increased operating costs

Answer: d

15)What is the main benefit of using a Comparative Income Statement?

a) It provides common size percentages

b) It helps in calculating return on investment

c) It reveals trends and changes in financial performance

d) It presents data as a percentage of total revenue

Answer: c

16)Comparative Balance Sheet:

16. A Comparative Balance Sheet compares the financial position of a company:

a) Across different industries

b) Over different periods

c) Against industry averages

d) With its competitors

Answer: b

17)What does a Comparative Balance Sheet primarily present side by side for analysis?

a) Changes in equity

b) Total assets and total liabilities

c) Budgeted and actual figures

d) Common size percentages

Answer: b

18)The main purpose of a Comparative Balance Sheet is to:

a) Assess changes in profitability

b) Evaluate changes in the equity section

c) Analyze trends in asset and liability items

d) Calculate liquidity ratios

Answer: c

19)If a company's long-term debt has increased compared to the previous year, what might this indicate?

a) Improved financial stability

b) Reduced interest expenses

c) Higher liquidity

d) Increased financial leverage

Answer: d

20)Comparative Balance Sheets help in:

a) Identifying the composition of expenses

b) Analyzing the efficiency of operations

c) Understanding changes in financial position

d) Calculating gross profit margin

Answer: c

21)In a Common Size Income Statement, which of the following is expressed as a percentage of total revenue?

a) Net income

b) Gross profit

c) Operating expenses

d) Dividends

Answer: c

22)Which financial statement shows the relative proportion of each asset and liability item in a Common Size Balance Sheet?

a) Income Statement

b) Statement of Retained Earnings

c) Cash Flow Statement

d) Common Size Balance Sheet

Answer: d

23)What is the main purpose of a Comparative Income Statement?

a) To compare net income of different companies

b) To calculate the debt-to-equity ratio

c) To analyze changes in income and expenses over time

d) To evaluate changes in the ownership structure

Answer: c

24)In a Comparative Balance Sheet, which of the following is most likely to appear side by side for comparison?

a) Total revenue and total expenses

b) Current assets and current liabilities

c) Beginning inventory and ending inventory

d) Gross profit and net profit

Answer: b

25)A company's Common Size Income Statement shows 30% for cost of goods sold and its Common Size Balance Sheet indicates a current ratio of 2.5. What conclusion can be drawn?

a) The company's net income is increasing.

b) The company's inventory turnover is improving.

c) The company has a strong liquidity position.

d) The company's net profit margin is declining.

Answer: c

MCQs WITH ANSWER -CHANGE IN PROFIT SHARING RATIO

 (MCQs) related to changes in profit sharing ratios in partnership accounting, along with the answers:

1)When partners decide to change their profit sharing ratios, which account is usually adjusted?

a) Cash Account

b) Bank Account

c) Capital Account

d) Expense Account

Answer: c) Capital Account

2)A change in profit sharing ratios can occur due to:

a) Change in business location

b) Change in partner salaries

c) Change in partner's personal life

d) Change in partner's profit interest

Answer: d) Change in partner's profit interest

3)In a partnership, the adjustment for a change in profit sharing ratios affects which type of account?

a) Nominal Account

b) Personal Account

c) Real Account

d) Tangible Account

Answer: b) Personal Account

4)The adjustment of capital accounts due to a change in profit sharing ratios is done to ensure:

a) Equal distribution of profits

b) Equal distribution of losses

c) Equitable distribution of gains and losses

d) Equitable distribution of expenses

Answer: c) Equitable distribution of gains and losses

5)Which account is debited when a partner's share of goodwill is credited during a change in profit sharing ratios?

a) Goodwill Account

b) Partner's Capital Account

c) Partner's Current Account

d) Reserve Account

Answer: b) Partner's Capital Account

6)When the new profit sharing ratios of partners are decided, they are based on:

a) Past performance

b) Business potential

c) Equal investment

d) Mutual agreement

Answer: d) Mutual agreement

7)A change in profit sharing ratios can result in:

a) Changes to the business name

b) Changes to partnership legal documents

c) Changes to the business location

d) Changes to the business type

Answer: b) Changes to partnership legal documents

8)If a partner gains a larger share of profits in the new ratio, what happens to their capital account?

a) It is credited

b) It is debited

c) No change

d) It is closed

Answer: a) It is credited

9)A partner's share of goodwill is credited to their capital account to:

a) Increase their share of profits

b) Reflect their claim to the business's reputation

c) Decrease their capital investment

d) Settle a liability

Answer: b) Reflect their claim to the business's reputation

10)Which financial statement is affected by a change in profit sharing ratios?

a) Income Statement

b) Balance Sheet

c) Cash Flow Statement

d) Statement of Changes in Equity

Answer: b) Balance Sheet

11)When partners decide to change their profit sharing ratios, which account is credited to adjust for the change?

a) Drawings Account

b) Salary Account

c) Capital Account

d) Current Account

Answer: c) Capital Account

12)A partner's share of reserves and accumulated profits is adjusted during a change in profit sharing ratios by:

a) Debiting the partner's current account

b) Debiting the partner's capital account

c) Crediting the partner's capital account

d) Crediting the partner's current account

Answer: c) Crediting the partner's capital account

13)A change in profit sharing ratios may occur due to:

a) Change in business name

b) Change in business location

c) Change in management

d) Change in market demand

Answer: b) Change in business location

14)If a partner's new share of profits is decreased, how is their capital account affected?

a) It is credited

b) It is debited

c) No change

d) It is closed

Answer: b) It is debited

15)What is the primary objective of adjusting capital accounts during a change in profit sharing ratios?

a) To record partner withdrawals

b) To allocate goodwill

c) To adjust for changes in partners' claims

d) To determine business expenses

Answer: c) To adjust for changes in partners' claims

16)A partner's share of losses is adjusted during a change in profit sharing ratios by:

a) Debiting the partner's current account

b) Debiting the partner's capital account

c) Crediting the partner's capital account

d) Crediting the partner's current account

Answer: a) Debiting the partner's current account

17)Which account is credited when a partner's share of goodwill is debited during a change in profit sharing ratios?

a) Goodwill Account

b) Partner's Capital Account

c) Partner's Current Account

d) Reserve Account

Answer: a) Goodwill Account

18)In a change of profit sharing ratios, a partner's capital account is credited when:

a) Their new share of profits increases

b) Their new share of profits decreases

c) Their new share of losses increases

d) Their new share of losses decreases

Answer: a) Their new share of profits increases

19)When a partner's share of reserves is debited during a change in profit sharing ratios, which account is credited?

a) Reserves Account

b) Partner's Capital Account

c) Partner's Current Account

d) Drawings Account

Answer: b) Partner's Capital Account

20)The process of adjusting partners' capital accounts during a change in profit sharing ratios ensures:

a) Constant total capital in the firm

b) Equal allocation of expenses

c) Equal distribution of losses

d) No need for a Balance Sheet adjustment

Answer: a) Constant total capital in the firm

21)When a partner's share of accumulated profits is debited, which account is credited?

a) Accumulated Profits Account

b) Partner's Capital Account

c) Partner's Current Account

d) Drawings Account

Answer: b) Partner's Capital Account

22)The change in profit sharing ratios can be due to a partner's:

a) Salary increase

b) Change in lifestyle

c) Change in investment

d) Change in mutual understanding

Answer: c) Change in investment

23)During a change in profit sharing ratios, if a partner's current account balance is debited, it indicates:

a) Their increased share of profits

b) Their decreased share of profits

c) Their increased share of losses

d) Their decreased share of losses

Answer: c) Their increased share of losses

24)During a change in profit sharing ratios, a partner's capital account is debited when:

a) Their new share of profits increases

b) Their new share of profits decreases

c) Their new share of losses increases

d) Their new share of losses decreases

Answer: b) Their new share of profits decreases

25)Which account is debited when a partner's share of accumulated profits is credited during a change in profit sharing ratios?

a) Partner's Capital Account

b) Accumulated Profits Account

c) Partner's Current Account

d) Drawings Account

Answer: b) Accumulated Profits Account

26)In a partnership, a change in profit sharing ratios may lead to changes in the allocation of:

a) Expenses

b) Losses only

c) Profits only

d) Gains and losses

Answer: d) Gains and losses

27)The primary reason for adjusting capital accounts during a change in profit sharing ratios is to reflect changes in partners':

a) Personal lives

b) Investment amounts

c) Salary payments

d) Drawings

Answer: b) Investment amounts

28)When a partner's share of reserves is credited during a change in profit sharing ratios, which account is debited?

a) Reserves Account

b) Partner's Capital Account

c) Partner's Current Account

d) Drawings Account

Answer: b) Partner's Capital Account

29)In a change of profit sharing ratios, a partner's capital account is debited when:

a) Their new share of profits increases

b) Their new share of profits decreases

c) Their new share of losses increases

d) Their new share of losses decreases

Answer: c) Their new share of losses increases

30)When a partner's share of accumulated losses is debited, which account is credited?

a) Accumulated Losses Account

b) Partner's Capital Account

c) Profit and Loss Account

d) Cash Account

 answer is b) Partner's Capital Account.