Financial Statements - I (Class 11 Accountancy)

Practise chapter-wise MCQs for Class 11 Accountancy — Financial Statements - I. Every question comes with the correct answer and an explanation.

Financial Statements - I (Class 11 Accountancy)

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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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?

  1. Cost of Goods Sold Account
  2. Sales Returns Account ✓ (correct)
  3. Sales Account
  4. Customers Account

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:

  1. Financial Position of the business
  2. Net Profit or Net Loss
  3. Gross Profit or Gross Loss ✓ (correct)
  4. Cash Flow from Operations

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'?

  1. Sale of old furniture
  2. Profit on sale of assets
  3. Interest on investments
  4. Sales of goods ✓ (correct)

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?

  1. Profit and Loss Account (Debit) ✓ (correct)
  2. Balance Sheet (Liability side)
  3. Balance Sheet (Asset side)
  4. 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?

  1. Interest on loan
  2. Freight inwards ✓ (correct)
  3. Depreciation on office furniture
  4. Salary of office accountant

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?

  1. Purchase of raw materials
  2. Factory rent
  3. Carriage outwards ✓ (correct)
  4. Wages paid to factory workers

Explanation: Indirect expenses are charged to the Profit and Loss Account rather than the Trading Account. Carriage OUTWARDS is a selling cost; factory wages, factory rent and raw materials are all direct/manufacturing costs.

Q7. Which account is debited when goods are purchased for resale?

  1. Sales Account
  2. Cost of Goods Sold Account
  3. Inventory Account
  4. Purchases Account ✓ (correct)

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:

  1. Revenue from Operations - Cost of Goods Sold ✓ (correct)
  2. Revenue from Operations - Indirect Expenses
  3. Revenue from Operations - Operating Expenses
  4. 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:

  1. A debit on the Trading Account and an asset on the Balance Sheet
  2. A credit on the Trading Account and an asset on the Balance Sheet ✓ (correct)
  3. A credit on the Profit and Loss Account and an asset on the Balance Sheet
  4. A debit on the Profit and Loss Account and an asset on the Balance Sheet

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:

  1. Salaries
  2. Wages
  3. Purchases Returns ✓ (correct)
  4. 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.

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