1. What are the objective of preparing financial statements ?
Answer:
2. What is the purpose of preparing trading and profit and loss account ?
Answer:
3. Explain the concept of cost of goods sold ?
Answer:
4. What is a balance sheet . What are its characteristics ?
Answer:
5. Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure :
a) Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable .
b) Expenditure incurred to provide one more exit in a cinema hall in compliance with a
government order .
a) Registration fees paid at the time of purchase of a building
b) Expenditure incurred in the maintenance of a tea garden which will produce tea after four years.
c) Depreciation charged on a plant .
d) The expenditure incurred in erecting a platform on which a machine will be fixed .
e) Advertising expenditure, the benefits of which will last for four years .
6. What is an operating profit? Long Answers
1. What are financial statements? What information do they provide .
2. What are closing entries? Give four examples of closing entries
3. Discuss the need of preparing a balance sheet.
4. What is meant by Grouping and Marshalling of assets and liabilities. Explain the ways in which a balance sheet may be marshalled.
Numerical Questions
1. From the following balances taken from the books of Simmi and Vimmi Ltd.
for the year ending March 31, 2017, calculate the gross profit.
Closing stock 2,50,000
Net sales during the year 40,00,000
Net purchases during the year 15,00,000
Financial Statements – I 311
Opening stock 15,00,000
Direct expenses 80,000
(Ans. Gross profit 11,70,000)
2. From the following balances extracted from the books of M/s Ahuja and Nanda. Calculate the amount of :
(a) Cost of goods available for sale
(b) Cost of goods sold during the year
(c) Gross Profit
Opening stock 25,000
Credit purchases 7,50,000
Cash purchases 3,00,000
Credit sales 12,00,000
Cash sales 4,00,000
Wages 1,00,000
Salaries 1,40,000
Closing stock 30,000
Sales return 50,000
Purchases return 10,000
(Ans. (a) 11,65,000 ; (b) 11,35,000 ; (c)4,15,000
3. Calculate the amount of gross profit and operating profit on the basis of the following balances extracted from the books of M/s Rajiv & Sons for the year ended March 31, 2017.
Opening stock 50,000
Net sales 11,00,000
Net purchases 6,00,000
Direct expenses 60,000
Administration expenses 45,000
Selling and distribution expenses 65,000
Loss due to fire 20,000
Closing stock 70,000
(Ans. Gross profit 4,60,000, Operating profit3,50,000)
4. Operating profit earned by M/s Arora & Sachdeva in 2016-17 was 17,00,000. Its non-operating incomes were1,50,000 and non-operating expenses were 3,75,000. Calculate the amount of net profit earned by the firm. (Ans. Net profit14,75,000)