Financial Statements - I (11 Accountancy)
Practise chapter-wise MCQs for Class 11 Accountancy — Financial Statements - I. Every question comes with the correct answer and an explanation.
TL;DR: Practise chapter-wise MCQs for Class 11 Accountancy — Financial Statements - I. Every question comes with the correct answer and an explanation.
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Practise chapter-wise MCQs for Class 11 Accountancy — Financial Statements - I. Every question comes with the correct answer and an explanation.
Financial Statements - I MCQs with Answers & Explanations
Q1. When 'Sales Returns' are recorded, which account is debited?
- Sales Account
- Cost of Goods Sold Account
- Customers Account
- Sales Returns Account ✓ (correct)
Explanation: Sales Returns (or Return inwards) reduce the sales revenue. The Sales Account is debited to reflect this reduction.
Q2. The primary purpose of the Trading Account is to determine:
- Gross Profit or Gross Loss ✓ (correct)
- Cash Flow from Operations
- Net Profit or Net Loss
- Financial Position of the business
Explanation: The Trading Account is prepared to ascertain the Gross Profit or Gross Loss resulting from the buying and selling of goods.
Q3. Which of the following represents 'Revenue from Operations'?
- Interest on investments
- Sales of goods ✓ (correct)
- Sale of old furniture
- Profit on sale of assets
Explanation: Revenue from Operations specifically refers to the income generated from the primary business activity, which is the sale of goods or rendering of services.
Q4. Bad debts are shown in which of the following statements?
- Balance Sheet (Asset side)
- Balance Sheet (Liability side)
- Profit and Loss Account (Debit) ✓ (correct)
- Trading Account (Debit)
Explanation: Bad debts are considered as an expense and are debited to the Profit and Loss Account.
Q5. Which of the following is a direct expense and forms part of the cost of goods sold?
- Salary of office accountant
- Interest on loan
- Depreciation on office furniture
- Freight inwards ✓ (correct)
Explanation: Freight inwards is the cost incurred for bringing goods to the place of business, directly related to acquiring the goods for sale.
Q6. Which of the following is an indirect expense?
- Salary of sales manager ✓ (correct)
- Factory rent
- Wages paid to factory workers
- Carriage outwards
Explanation: Salary of a sales manager is an operating expense related to selling and distribution, not directly involved in the production or purchase of goods. Factory rent, wages, and carriage outwards are directly related to the cost of goods sold.
Q7. Which account is debited when goods are purchased for resale?
- Sales Account
- Purchases Account ✓ (correct)
- Inventory Account
- Cost of Goods Sold Account
Explanation: The Purchases Account is debited to record the cost of goods acquired for resale. This account is then used to calculate the Cost of Goods Sold.
Q8. Gross Profit is calculated as:
- Revenue from Operations - Indirect Expenses
- Revenue from Operations - Operating Expenses
- Revenue from Operations - Cost of Goods Sold ✓ (correct)
- Revenue from Operations - Selling and Distribution Expenses
Explanation: Gross Profit represents the profit earned from the core trading activity before considering operating and other expenses. It is calculated by deducting the Cost of Goods Sold from the Revenue from Operations.
Q9. Closing inventory is shown in the financial statements as:
- A credit on the Profit and Loss Account and an asset on the Balance Sheet
- A debit on the Trading Account and an asset on the Balance Sheet
- A debit on the Profit and Loss Account and an asset on the Balance Sheet
- A credit on the Trading Account and an asset on the Balance Sheet ✓ (correct)
Explanation: Closing inventory is credited to the Trading Account to reduce the cost of goods sold and is shown as an asset on the Balance Sheet as it represents goods available for sale in the next period.
Q10. An item that appears on both the debit side of the Trading Account and the credit side of the Profit and Loss Account is:
- Purchases Returns ✓ (correct)
- Salaries
- Wages
- Rent Received
Explanation: Purchases Returns (or Return outwards) are deducted from purchases on the debit side of the Trading Account, effectively reducing the cost of goods sold. In the context of the P&L, it is a reduction of expenses, and thus has a credit effect on the net profit.
More 11 Accountancy MCQs
- Accounting for Partnership: Basic Concepts
- Goodwill: Nature and Valuation
- Reconstitution of a Partnership Firm - Change in Profit Sharing Ratio
- Reconstitution of a Partnership Firm - Admission of a Partner
- Reconstitution of a Partnership Firm - Retirement and Death of a Partner
- Dissolution of Partnership Firm
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