20 multiple-choice questions (MCQs) based on the chapter of Trading, Profit & Loss Account, and Balance Sheet
SBSIRCOMMERCE PRESENT
### 1. **What is the main objective of preparing a Trading Account?**
- a) To ascertain net profit
- b) To determine gross profit or gross loss
- c) To calculate net worth
- d) To assess capital employed
**Answer:** b) To determine gross profit or gross loss
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### 2. **Wages paid for factory workers are shown in which account?**
- a) Profit & Loss Account
- b) Balance Sheet
- c) Trading Account
- d) Cash Flow Statement
**Answer:** c) Trading Account
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### 3. **Which of the following is NOT a part of the Balance Sheet?**
- a) Capital
- b) Stock
- c) Gross Profit
- d) Debtors
**Answer:** c) Gross Profit
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### 4. **Where are closing stock values shown in the financial statements?**
- a) Trading Account (debit side) and Profit & Loss Account
- b) Trading Account (credit side) and Balance Sheet (assets side)
- c) Only in Profit & Loss Account
- d) Only in Balance Sheet
**Answer:** b) Trading Account (credit side) and Balance Sheet (assets side)
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### 5. **Which of the following is an indirect expense?**
- a) Wages
- b) Salaries
- c) Carriage Inwards
- d) Factory Rent
**Answer:** b) Salaries
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### 6. **In which account is the adjustment of bad debts made?**
- a) Trading Account
- b) Profit & Loss Account
- c) Balance Sheet (Liabilities Side)
- d) Trading Account (Credit Side)
**Answer:** b) Profit & Loss Account
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### 7. **What is the formula to calculate Gross Profit?**
- a) Net Sales - Cost of Goods Sold
- b) Net Sales - Opening Stock
- c) Purchases - Direct Expenses
- d) Net Sales - Closing Stock
**Answer:** a) Net Sales - Cost of Goods Sold
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### 8. **Where is prepaid insurance recorded in the Balance Sheet?**
- a) Current Liabilities
- b) Fixed Assets
- c) Current Assets
- d) Long-term Liabilities
**Answer:** c) Current Assets
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### 9. **Which account shows both the net profit and net loss of a business?**
- a) Trading Account
- b) Profit & Loss Account
- c) Balance Sheet
- d) Capital Account
**Answer:** b) Profit & Loss Account
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### 10. **Which of the following is treated as a liability?**
- a) Prepaid expenses
- b) Outstanding expenses
- c) Closing stock
- d) Capital
**Answer:** b) Outstanding expenses
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### 11. **Interest received on investments is shown in which account?**
- a) Trading Account
- b) Profit & Loss Account (Credit Side)
- c) Balance Sheet (Liabilities Side)
- d) Balance Sheet (Assets Side)
**Answer:** b) Profit & Loss Account (Credit Side)
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### 12. **Which of the following will be shown on the debit side of the Trading Account?**
- a) Sales
- b) Purchases Returns
- c) Carriage Inwards
- d) Discount Received
**Answer:** c) Carriage Inwards
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### 13. **Net Profit is transferred to which account at the end of the financial year?**
- a) Trading Account
- b) Profit & Loss Account
- c) Balance Sheet (Liabilities Side)
- d) Capital Account
**Answer:** d) Capital Account
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### 14. **What is the treatment of depreciation in the financial statements?**
- a) Shown in Trading Account
- b) Shown as an asset in the Balance Sheet
- c) Shown as an expense in the Profit & Loss Account
- d) Added to the cost of fixed assets
**Answer:** c) Shown as an expense in the Profit & Loss Account
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### 15. **Which of the following is considered a fictitious asset?**
- a) Goodwill
- b) Discount on issue of shares
- c) Cash in hand
- d) Debtors
**Answer:** b) Discount on issue of shares
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### 16. **The portion of profit not distributed to shareholders is called?**
- a) Dividends
- b) Retained Earnings
- c) Reserves and Surplus
- d) Capital
**Answer:** b) Retained Earnings
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### 17. **Which of the following is an example of direct expenses?**
- a) Office rent
- b) Carriage Outwards
- c) Factory Rent
- d) Bank Charges
**Answer:** c) Factory Rent
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### 18. **Which of the following is NOT a liability?**
- a) Creditors
- b) Debtors
- c) Outstanding Rent
- d) Bills Payable
**Answer:** b) Debtors
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### 19. **Which of the following is deducted from gross profit to determine net profit?**
- a) Carriage Inwards
- b) Carriage Outwards
- c) Wages
- d) Purchases
**Answer:** b) Carriage Outwards
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### 20. **The net worth of a company is represented by:**
- a) Fixed Assets - Current Liabilities
- b) Total Assets - Total Liabilities
- c) Current Assets - Current Liabilities
- d) Current Liabilities + C
apital
**Answer:** b) Total Assets - Total Liabilities
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These MCQs cover key concepts related to Trading, Profit & Loss Account, and Balance Sheet topics in Accountancy.
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