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B Com Exam  >  B Com Tests  >  Accountancy and Financial Management  >  Test: Principles of Accounting- 2 - B Com MCQ

Test: Principles of Accounting- 2 - B Com MCQ


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10 Questions MCQ Test Accountancy and Financial Management - Test: Principles of Accounting- 2

Test: Principles of Accounting- 2 for B Com 2024 is part of Accountancy and Financial Management preparation. The Test: Principles of Accounting- 2 questions and answers have been prepared according to the B Com exam syllabus.The Test: Principles of Accounting- 2 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Principles of Accounting- 2 below.
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Test: Principles of Accounting- 2 - Question 1
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Which of the following is true about the trading account?

Detailed Solution for Test: Principles of Accounting- 2 - Question 1

The correct statement about the trading account is: It determines the net profit or net loss of a business concern.

Explanation:

  • Statement 1: This is correct. The trading account calculates the gross profit (or loss) of a business by subtracting the cost of goods sold (COGS) from net sales/revenue. This gives the gross profit, which is then transferred to the profit and loss account to calculate the net profit or loss after considering other expenses and incomes.

  • Statement 2: The trading account includes only direct expenses related to the purchase and sale of goods, not all direct and indirect expenses.

  • Statement 3: The trading account is typically prepared at the end of an accounting period, not on the first day.

  • Statement 4: The trading account focuses on current transactions related to the sale and purchase of goods during the accounting period and does not consider items from past or future years.

Therefore, the correct answer is: It determines the net profit or net loss of a business concern.

Test: Principles of Accounting- 2 - Question 2
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What does a credit side exceeding the debit side in the trading account indicate?

Detailed Solution for Test: Principles of Accounting- 2 - Question 2
If the credit side of the trading account exceeds the debit side, it represents gross profit. Gross profit is the excess of net sales over the cost of goods sold.
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Test: Principles of Accounting- 2 - Question 3
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Why is the trading account necessary?

Detailed Solution for Test: Principles of Accounting- 2 - Question 3
The trading account helps in determining the gross profit or gross loss of a business concern. It is the first stage of preparing the final accounts. The net profit or net loss is determined through the profit and loss account.
Test: Principles of Accounting- 2 - Question 4
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What is the purpose of calculating the gross profit of a business?
Detailed Solution for Test: Principles of Accounting- 2 - Question 4
The gross profit of a business is important as it is used to meet the indirect expenses of the business concern. Indirect expenses are the expenses incurred for running the business, such as rent, salaries, and advertising.
Test: Principles of Accounting- 2 - Question 5
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How can net sales be determined?
Detailed Solution for Test: Principles of Accounting- 2 - Question 5
Net sales can be determined by deducting sales returns from gross sales. Sales returns are the goods returned by customers, which are deducted from the total sales to calculate the net sales.
Test: Principles of Accounting- 2 - Question 6
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What does an increase in the percentage of gross profit on net sales indicate?
Detailed Solution for Test: Principles of Accounting- 2 - Question 6
An increase in the percentage of gross profit on net sales indicates the success of the business. It means that the business is earning a higher profit compared to the previous year, which is a positive sign.
Test: Principles of Accounting- 2 - Question 7
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What can be determined by analyzing the variances in the percentage of different items of buying expenses on gross profit?
Detailed Solution for Test: Principles of Accounting- 2 - Question 7
Analyzing the variances in the percentage of different items of buying expenses on gross profit helps in determining the cause of the variations. This analysis can help in controlling the amount of expenses and identifying areas where costs can be reduced.
Test: Principles of Accounting- 2 - Question 8
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What does a higher inventory turnover ratio indicate?
Detailed Solution for Test: Principles of Accounting- 2 - Question 8
A higher inventory turnover ratio indicates a favorable sign for a business. It means that goods are sold soon after their purchase, which indicates efficient management of inventory and quick turnover of stock.
Test: Principles of Accounting- 2 - Question 9
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What is the advantage of preparing a trading account format?
Detailed Solution for Test: Principles of Accounting- 2 - Question 9
Preparing a trading account format helps in providing accurate information for sales tax authorities. It allows them to
Test: Principles of Accounting- 2 - Question 10
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Which of the following financial statements provides information about a company's financial position at a specific point in time?
Detailed Solution for Test: Principles of Accounting- 2 - Question 10

The Balance Sheet, also known as the Statement of Financial Position, provides a snapshot of a company's financial health at a specific moment in time. It lists a company's assets, liabilities, and shareholders' equity. Assets are what a company owns, liabilities are what it owes, and shareholders' equity is the residual interest in the assets of the entity after deducting liabilities. This statement is essential for investors, creditors, and analysts to understand a company's financial stability.

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