This quiz works best with JavaScript enabled. Home > Cbse > Class 12 > Commerce > Accountancy > Class 12 Accountancy Chapter 7 Financial Statements Of Companies – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Class 12 Accountancy Chapter 7 Financial Statements Of Companies Quiz 1 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. In a Statement of Owner's Equity, if the Beginning Capital is $ 47, 500, Net Income is $ 11, 800 and the Ending Capital is $ 43, 400, what is the Drawings figure? A) $ 7, 700. B) $ 15, 900. C) $ 59, 300. D) $ 4, 100. Show Answer Correct Answer: B) $ 15, 900. 2. Transferring Information from the general journal to the ledger accounts is known as ..... ? A) Calculating. B) Posting. C) Copying. D) Extending. Show Answer Correct Answer: B) Posting. 3. Which account is classified as an Expense? A) Cell phone bill. B) Auto Loan. C) College Fund. D) Bank Account. Show Answer Correct Answer: A) Cell phone bill. 4. Accumulated Dividend Arrears on preference shares is shown is the company's Balance Sheet ..... A) Contingent Liability. B) Commitments. C) Current Liabilities. D) Short Term Provisions of. Show Answer Correct Answer: B) Commitments. 5. Wages paid to the Sales staff A) Cost of Goods sold. B) Administrative cost. C) Distribution cost. D) Finance cost. Show Answer Correct Answer: C) Distribution cost. 6. When asked to calculate the book value of a share, which formula will be used? A) Shareholders equityShares in issue. B) Net profit after taxShares in issue. C) Net before after taxShares in issue. D) Dividends paid and declaredShares in issue. Show Answer Correct Answer: A) Shareholders equityShares in issue. 7. A six-column worksheet is prepared at the end of the fiscal period. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: A) True. 8. Which proves that the liquidity of a company is not positive? A) Debtors collection is 33 days and the Creditors payment period is 47 days. B) The stock turnover rate of a clothing shop is 4 times a year. C) The acid test ratio is 0, 9:1. D) The current ratio of a fruit and veg is 8:1. Show Answer Correct Answer: D) The current ratio of a fruit and veg is 8:1. 9. Why do businesses need a cash flow statement? A) To reconcile the difference between revenue and expenses. B) To show the cash inflows and outflows over a period of time. C) To calculate the taxes owed by a business. D) To track the inventory of a business. Show Answer Correct Answer: B) To show the cash inflows and outflows over a period of time. 10. Which of the statements about profit is incorrect? A) Profit = Revenue-Expenses. B) Profit includes revenue and other income. C) A loss occurs if expenses are greater than revenues. D) Profit at the end of the year is added to the business's bank balance. Show Answer Correct Answer: D) Profit at the end of the year is added to the business's bank balance. 11. What are the steps to calculate Profit for the year? A) Gross profit + Income-Capital. B) Gross profit + Income + Expenses. C) Gross profit + Income-Expenses. D) Gross profit-Income-Expenses. Show Answer Correct Answer: C) Gross profit + Income-Expenses. 12. Two examples of tangible assets are: A) Trademarks and Patents. B) B. Inventory and Trademarks. C) B. Patents and Cash. D) None of the above. Show Answer Correct Answer: A) Trademarks and Patents. 13. The income statement can be expressed as an equation: A) Revenue + Expenses = Income/Loss. B) Expenses = Net Income + Revenue. C) Revenue-Expenses = Net Income (Loss). D) Income = Income-Expenses. Show Answer Correct Answer: C) Revenue-Expenses = Net Income (Loss). 14. Prepaid Expenses appear in company B/ S under sub head ..... A) Other current Assets. B) Short term Loans and Advances. C) Intangible Assets. D) Other Non Current Asstes. Show Answer Correct Answer: A) Other current Assets. 15. Why do businesses using accrual accounting need a cash flow statement? A) To show the cash inflows and outflows over a period of time. B) To reconcile the difference between revenue and expenses. C) To track the inventory of a business. D) To calculate the taxes owed by a business. Show Answer Correct Answer: A) To show the cash inflows and outflows over a period of time. 16. The owner's equity will increase when ..... i-a business obtained net profitii-a business incurred net lossiii-the owner withdrew cash from the companyiv-the owner brought in machinery to use in the business A) I and iv. B) Ii and iii. C) I and iii. D) Ii and iv. Show Answer Correct Answer: A) I and iv. 17. Which of of the following would be an INCORRECT extension on the Worksheet? A) HST Payable on the credit side of the Balance Sheet columns. B) Repairs Expense on the debit side of the Income Statement columns. C) Automobile on the credit side of the Balance Sheet columns. D) Sales on the credit side of the Income Statement columns. Show Answer Correct Answer: C) Automobile on the credit side of the Balance Sheet columns. 18. Which account is classified as an Liability? A) Concert Tickets. B) Bank Account. C) Allowance. D) Auto Loan. Show Answer Correct Answer: D) Auto Loan. 19. What is the primary objective of financial reporting? A) To provide economic information that is comprehensible to all users. B) To provide management with an accurate evaluation of their financial performance. C) To provide forecasts for future cash flows and financial performance. D) To provide information that is useful for economic decision making. Show Answer Correct Answer: D) To provide information that is useful for economic decision making. 20. Which one of the following would help a company with high gearing to reduce its gearing ratio? A) Making a bonus issue of shares. B) Making a rights issue of equity shares. C) Issuing further long-term loan notes. D) Paying dividends on its equity shares. Show Answer Correct Answer: B) Making a rights issue of equity shares. 21. A ..... business is one which buys and sells goods. A) Service. B) Trading. C) All the above. D) None of the above. Show Answer Correct Answer: B) Trading. 22. According to prescribed order of assets in a Company's Balance Sheet ..... assets should be shown first of all. A) Non-Current Assets. B) Current Assets. C) Current Investments. D) Loans and Advances. Show Answer Correct Answer: A) Non-Current Assets. 23. Petrol, Rego, insurance, repairs etc of the delivery vehicles A) Administrative cost. B) Cost of Goods sold. C) Finance cost. D) Distribution cost. Show Answer Correct Answer: D) Distribution cost. 24. In a company's Balance Sheet ..... appear under the head 'Non-Current Assets' A) Goodwill. B) Patents. C) Vehicles. D) All of the above. Show Answer Correct Answer: D) All of the above. 25. Which financial statement summarizes a business's revenues and expenses over a period of time? A) Income statement. B) Balance sheet. C) Cash flow statement. D) Statement of profit and loss. Show Answer Correct Answer: A) Income statement. 26. Which account is classified as an income? A) Cash. B) Credit card. C) Cell phone bill. D) Babysitting payment. Show Answer Correct Answer: D) Babysitting payment. 27. How do you calculate the Net Income from an Income Statement? A) Net Income = Total Revenue / Total Expenses. B) Net Income = Total Revenue + Total Expenses. C) Net Income = Total Revenue x Total Expenses. D) Net Income = Total Revenue-Total Expenses. Show Answer Correct Answer: D) Net Income = Total Revenue-Total Expenses. 28. Which of the following is NOT an objective of financial reporting? A) Provide information that is useful in investment and credit decisions. B) Provide information about economic resources, claims to those resources and changes in them. C) Provide information that is useful in assessing future cash flows. D) Provide information on the liquidation value of a business. Show Answer Correct Answer: D) Provide information on the liquidation value of a business. 29. Who is responsible in the issuance of new accounting standards in Malaysia? A) Central Bank of Malaysia. B) Malaysian Accounting Standards Board (MASB). C) Companies Commission of Malaysia. D) Securities Commission. Show Answer Correct Answer: B) Malaysian Accounting Standards Board (MASB). 30. Grace, Ava, and Daniel are playing a game about financial statements. They need your help! Which financial statement shows a company's assets, liabilities, and shareholders' equity at a specific point in time? A) Balance sheet. B) Income statement. C) Cash flow statement. D) Statement of retained earnings. Show Answer Correct Answer: A) Balance sheet. 31. Why do investment analysts typically want to see a company's financial statements? A) To determine the company's credit rating. B) To assess the ability of the company to pay taxes. C) To decide whether to recommend the company's securities to clients. D) To evaluate the business's competitive strategies. Show Answer Correct Answer: C) To decide whether to recommend the company's securities to clients. 32. As per Schedule III, Part I of the Companies Act. 2013 Unpaid dividend will be presented under which of the following head/sub-head, in the Balance Sheet of a company? A) Reserves and Surplus. B) Current Liabilities. C) Contingent Liabilities. D) Shareholders Funds. Show Answer Correct Answer: B) Current Liabilities. 33. What are assets? A) What a company owns; anything of value owned by a business. B) Costs of operating a business. C) Detailed plans for the financial needs of individuals, families, and businesses. D) Differences between actual and budgeted performance. Show Answer Correct Answer: A) What a company owns; anything of value owned by a business. 34. Aiden, Kai, and Ethan are having a debate about the purpose of an income statement. Can you help them settle the argument? A) Aiden thinks it's to track the company's stock prices. B) Kai believes it's to calculate the company's market share. C) Ethan says it's to determine the company's customer satisfaction levels. D) Or is it to provide a summary of a company's revenues, expenses, and net income over a specific period of time?. Show Answer Correct Answer: D) Or is it to provide a summary of a company's revenues, expenses, and net income over a specific period of time?. 35. What is the purpose of financial statements? A) To give investors and lenders an understanding of a business's financial health. B) To provide a breakdown of a business's marketing expenses. C) To track the number of employees in a business. D) To calculate the taxes owed by a business. Show Answer Correct Answer: A) To give investors and lenders an understanding of a business's financial health. 36. The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called the: A) Statement of Cash Flows. B) Statement of Retained Earnings. C) Balance Sheet. D) Income Statement. Show Answer Correct Answer: D) Income Statement. 37. Which is the category to see whether the company can meet their short term obligations. A) Solvency. B) Liquidity. C) Profitability. D) Return. Show Answer Correct Answer: B) Liquidity. 38. All of the following are assets, except for? A) Patents. B) Loans to other businesses. C) Loans from other businesses. D) Goodwill. Show Answer Correct Answer: C) Loans from other businesses. 39. All of the following are revenues, except for? A) Dividends received. B) Commission Revenue. C) Rent Revenue. D) Accounts receivable. Show Answer Correct Answer: D) Accounts receivable. 40. With which ratio can the risk of a company be calculated? A) Total assets:total liabilities. B) Total liabilities:Equity. C) Current assets:Current liablities. D) Debt:Equity. Show Answer Correct Answer: D) Debt:Equity. 41. ..... are amounts which are due for repayment within the next 12 months. A) Current Liabilities. B) Non-Current Liabilities. C) All the above. D) None of the above. Show Answer Correct Answer: A) Current Liabilities. 42. What is owner's equity? A) The value of the business after liabilities are subtracted from assets; the value of the owner's investment in the business. B) What a company owes. C) Documents that are used to record and analyze the financial performance of a business. D) All income a company receives overtime. Show Answer Correct Answer: A) The value of the business after liabilities are subtracted from assets; the value of the owner's investment in the business. 43. Under which of the following headings/sub-headings, Calls-in-Advance will be presented in the Balance Sheet of a company as per Schedule III Part I of the Companies Act, 2013? A) Current Liabilities. B) Share Capital. C) Share Application Money Pending Allotment. D) Reserves and Surplus. Show Answer Correct Answer: A) Current Liabilities. 44. Operating Income is also known as A) Revenue. B) EBT. C) EBIT. D) EAT. Show Answer Correct Answer: C) EBIT. 45. Calls in Arrears appear in a Company's Balance Sheet under ..... A) Reserve & Surplus. B) Short-term Borrowings. C) Shareholder's Funds. D) Contingent Liabilities. Show Answer Correct Answer: C) Shareholder's Funds. 46. Identify the correct statement.Statement 1-Balance sheet is also called as Statement of Affairs Statement 2-Statement of Affairs shows the financial position of the Company. A) Only 1 is correct. B) Only 2 is correct. C) Both 1 and 2 are correct. D) None of the above. Show Answer Correct Answer: C) Both 1 and 2 are correct. 47. A possible main source of revenue for service business A) Sales. B) Fees received. C) Capital. D) Interest received. Show Answer Correct Answer: B) Fees received. 48. Dividend payable to redeemable preference shareholders will not be classified as part of finance cost in the SOPL. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: B) False. 49. Purchase of goodwill will appear in ..... activity? A) Operating. B) Investing. C) Both. D) None. Show Answer Correct Answer: B) Investing. 50. In the SOCIE, the company should disclosed all the following components except: A) Other income. B) Share capital. C) General reserve. D) Retained profits. Show Answer Correct Answer: A) Other income. 51. Revenues-Expenses =? A) Gross Profit. B) Total Revenue. C) Owner's Equity. D) Net Income or Net Loss. Show Answer Correct Answer: D) Net Income or Net Loss. 52. How will the debtors collection period be calculated? A) Average debtors + average creditors / cost of sales x 365. B) Average debtors / credit sales x 365. C) Credit sales / average debtors x 365. D) Debtors x credit sales x 365. Show Answer Correct Answer: B) Average debtors / credit sales x 365. 53. 9% Debentures redeemable within 12 months of the date of Balance Sheet will be shown under: A) Short-term Borrowings. B) Other Current Liability. C) Trade Payables. D) Short-term Provision. Show Answer Correct Answer: B) Other Current Liability. 54. Which section of the Companies Act, 2013 requires that the balance sheet be prepared in the prescribed form? A) Section 212. B) Section 129. C) Section 128. D) Section 130. Show Answer Correct Answer: B) Section 129. 55. During a class discussion, Daniel, Liam, and Maya were discussing the purpose of a balance sheet. What is the primary purpose of a balance sheet? A) To determine a company's employee satisfaction. B) To provide a snapshot of a company's financial position. C) To analyze a company's marketing strategies. D) To track a company's sales and revenue. Show Answer Correct Answer: B) To provide a snapshot of a company's financial position. 56. If the current ratio for a company is equal to its quick ratio, which of the following statements is true? A) The company does not carry any inventory. B) Receivables plus cash is greater than payables minus inventories. C) Working capital is positive. D) The current ratio must be greater than one. Show Answer Correct Answer: A) The company does not carry any inventory. 57. Accounting documents intended to help the internal business make decisions. A) Financial Accounting. B) Managerial Accounting. C) All the above. D) None of the above. Show Answer Correct Answer: B) Managerial Accounting. 58. The date of this financial statement DOES NOT include "For Month Ended" A) Balance Sheet. B) Income Statement. C) Worksheet. D) Cash Flow Statement. Show Answer Correct Answer: A) Balance Sheet. 59. Creditors of a business may want to use the accounts to A) Check that any amounts owing to them are likely to be paid when due. B) Be sure of an increasing share of the market. C) Be sure that after-sales service will continue. D) Check that the business is making a profit. Show Answer Correct Answer: A) Check that any amounts owing to them are likely to be paid when due. 60. A company's gross profit as a percentage of sales increased from 24% in the year ended 31 December 20X1 to 27% in the year ended 31 December 20X2.Which of the following events is most likely to have caused the increase? A) Understatement of the closing inventory at 31 December 20X1. B) A purchase in December 20X1 mistakenly being recorded as happening in January 20X2. C) An increase in sales volume. D) Overstatement of the closing inventory at 31 December 20X1. Show Answer Correct Answer: A) Understatement of the closing inventory at 31 December 20X1. 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