Financial Statements & Analysis: 40 MCQs with Explanations

1,500 is the correct answer to “Find the cost of goods sold if goods are sold for 2,000 at 25% profit on cost”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Consider the following data for a company during the month of June 2012 Budgeted hours 4,000 Standard hours for actual production 4,400 Maximum possible hours in the budget period 4,800 Actual hours 3,800 The activity ratio of the company during the month is 111%.

0.65 is the correct answer to “If the asset turnover and profit margin of a company are 1.85 and 0.35 respectively, the return on investment is.”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

24 is the correct answer to “A company is currently operating at 80% capacity level. The production under normal capacity level is 1,50,000 units. The variable cost per unit is ` 14 and the total fixed costs are ` 8,00,000. If the company wants to earn a profit of ` 4,00,000, then the price of the product per unit should be”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Balance Sheet only is the correct answer to “Closing stock appearing in the Trial Balance is shown in:”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Profit and Loss A/c is the correct answer to “Depreciation Account appearing in the Trial Balance is shown in:”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Profit on sale of old plant is: Profit and Loss A/c .

2,40,000 is the correct answer to “Riaz holds an average inventory of 36,000(CP) with an inventory turnover of 5 times. If the firm makes a gross profit of 25% on sales, find the total sales of the company.”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

6441 is the correct answer to “From the following details what will be the partners commission? Net profit before charging partners commission 65,000. Partners commission @ 11% after charging such commission.”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

7150 is the correct answer to “From the following details what will be the partners commission? Net profit before charging partners commission 65,000. Partners commission 11% before charging such commission”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Arrangement of Balance Sheet in a logical order is known as Marshalling Balance Sheet .

60,000 is the correct answer to “Find the value of opening stock from the following data. Purchases 1,50,000, Closing stock 30,000 Sales 2,20,000, Gross profit 40,000.”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

On the liabilities side under current liabilities is the correct answer to “Tax deducted at source appears in the Balance Sheet”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

The Balance Sheet gives information regarding the Financial position as on a particular date .

Profit & Loss Account is prepared for a certain period and hence it is an interim statement is the correct answer to “Which of the following is not true with regard to preparation of Profit & Loss Account”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Financial results of the concern for a period is the correct answer to “The Profit and Loss Account shows the:”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Drawings is the correct answer to “Which of the following will not appear in Profit and Loss Account of a business”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Gross Profit is equal to Sales − Cost of goods sold .

Adding 1,800 to closing stock and deducting 2,200 each from debtors and sales is the correct answer to “Sundry debtors as per Trial Balance is 43,000 which includes 2,200 due from H in respect of goods sent to him on approval basis, the cost price of which is 1,800. Rectification would involve:”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Debited to P&L A/c is the correct answer to “Depreciation appearing in the Trial Balance should be”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

common size income statement is the correct answer to “An income statement in which each item expressed as percentage of Sale”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

20,000 Loss is the correct answer to “A second hand car is purchased for 2,00,000 and sold at 1,40,000 after two years. If depreciation is charged @ 10% on SLM method, find the profit or loss on sale of the car”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Loss of 22,000 is the correct answer to “A second hand car is purchased for 2,00,000 and sold at 1,40,000 after two years. If depreciation is charged @ 10% on written down value method, find the profit or loss on sale of the Second hand car”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Any gain on the sale of non-current assets should be Deducted, Added from the net profit and the loss must be _________to the net profit in determining fund from operation.

Which of the following statements are / is true? − Events after Balance Sheet are The events after Balance Sheet date but before its approval by the board.

Mistake in balancing an account is the correct answer to “Which of the following errors affects the agreement of a Trial Balance”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

The Trial Balance has no statutory importance from the point of view of law is the correct answer to “Which of the following statements is correct about Trial Balance”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Closing stock in the Trial Balance implies that It is adjusted in the Purchase A/c .

Ledger account is the correct answer to “Which of the following is known as the base for preparing trial balance”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

An asset must be Controlled by the business to be shown as an asset in its œbalance sheet.

Cash account is the correct answer to “Which of the following account with normal balance is shown at the debit side of a trial balance”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Accrued expenses account is the correct answer to “Which of the following account with normal balance is shown at the credit side of a trial balance”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

If debit balances = credit balances, trial balance only shows or check the Arithmetic accuracy and it does not indicate that no errors were made during recording and posting.

Trial balance is prepared to check accuracy of Ledger accounts balances .

No is the correct answer to “If a transaction is completely omitted from the books of accounts, will it affect the agreement of a trial balance”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Ledger accounts is the common base for preparing a trial balance.

It lists down the balances of accounts is the correct answer to “Which of the following is true about a trial balance”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Mathematically Capital+Liabilities=Assets is the correct answer to “Debit balance = Credit balance in a trial balance indicates that:”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

At the end of an accounting period is the correct answer to “Trial balance is commonly prepared”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Partial omission of a transaction is the correct answer to “Which of the following will affect the agreement of a trial balance”. Items of this type are drawn from the Financial Statements & Analysis syllabus of Pakistani competitive exams, where the fact is tested verbatim.