This quiz works best with JavaScript enabled. Home > Cbse > Class 12 > Commerce > Accountancy > Class 12 Accountancy Chapter 7 Financial Statements Of Companies – Quiz 2 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Class 12 Accountancy Chapter 7 Financial Statements Of Companies Quiz 2 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Expense on buying goods from overseas A) Customs duty. B) Rates. C) Distribution cost. D) GST. Show Answer Correct Answer: A) Customs duty. 2. Net Income / Total Revenues =? A) Net Income Ratio. B) Current Ratio. C) Debt Ratio. D) Sales Ratio. Show Answer Correct Answer: A) Net Income Ratio. 3. Which financial statement gives a snapshot of a business's assets, liabilities, and equity at a single point in time? A) Statement of profit and loss. B) Cash flow statement. C) Balance sheet. D) Income statement. Show Answer Correct Answer: C) Balance sheet. 4. Which of the following definitions is not included within the definition of control perIFRS 10 Consolidated Financial Statements? A) Having the ability to use its power over the investee to affect the amount of theinvestor's returns. B) Having exposure, or rights, to variable returns from its investment with the investee. C) Having power over the investee. D) Having the majority of shares in the investee. Show Answer Correct Answer: D) Having the majority of shares in the investee. 5. Depreciation expense A) Financing. B) Investing. C) Supplemental. D) Operating. Show Answer Correct Answer: D) Operating. 6. Why might a union request financial statements from a business? A) To evaluate the business's competitive strategies. B) To determine the creditworthiness of the business. C) To assess the ability to pay compensation and benefits to union members. D) To decide whether to invest in the business. Show Answer Correct Answer: C) To assess the ability to pay compensation and benefits to union members. 7. What does the cash flow statement show? A) The marketing expenses of a business. B) The profitability of a business over a period of time. C) The cash inflows and outflows of a business. D) The assets, liabilities, and equity of a business. Show Answer Correct Answer: C) The cash inflows and outflows of a business. 8. What is the purpose of the Balance Sheet? A) Inform stakeholders the assets and liabilities of business. B) Provides information on how resources are obtained and used and the claim by the owner on the net assets of the business at a point in time. C) Provides information on how resources are obtained and used in the business at a point in time. D) Inform stakeholders the owner's equity of business. Show Answer Correct Answer: B) Provides information on how resources are obtained and used and the claim by the owner on the net assets of the business at a point in time. 9. When will the reported results in financial statements be suspicious, potentially due to fraud from the below mentioned cases? A) When there is a sudden spike in sales. B) When non-financial issues are addressed. C) When the statements are audited. D) When the results are consistent with industry norms. Show Answer Correct Answer: A) When there is a sudden spike in sales. 10. Which of the following is not the limitation of financial statement analysis? A) Ignores price level changes. B) Window dressing. C) Inter firm comparisons. D) Qualitative aspect ignored. Show Answer Correct Answer: C) Inter firm comparisons. 11. What are the steps to calculate Net Profit for the year? A) Gross profit + Income + Expenses. B) Gross profit + Income-Capital. C) Gross profit + Income-Expenses. D) Gross profit-Income-Expenses. Show Answer Correct Answer: C) Gross profit + Income-Expenses. 12. A balance sheet shows: A) How much gross profit it has. B) How much net profit it has. C) How much a business owns and owes. D) None of the above. Show Answer Correct Answer: C) How much a business owns and owes. 13. Which of the following is not a part of the financial reports of the organization A) Balance sheet. B) Income statements. C) Report with the vision and mission of the organization. D) Report regarding the flow of cash. Show Answer Correct Answer: C) Report with the vision and mission of the organization. 14. A firm's financial obligations to short-term creditors, which must be repaid within one year. A) Accounts Payable. B) Accounts Receivable. C) Current Assets. D) Current Liabilities. Show Answer Correct Answer: D) Current Liabilities. 15. What is shown as a liability in a statement of financial position? A) Bank overdraft. B) Fixtures and fittings. C) Inventory. D) Prepaid rent. Show Answer Correct Answer: A) Bank overdraft. 16. Which account is classified as an Asset? A) Concert Tickets. B) Bank Account. C) Allowance. D) Bus Pass. Show Answer Correct Answer: B) Bank Account. 17. The following are types Of key performance indicators (KPIS):(i) Return on capital employed(ii) Gross profit percentage(iii) Acid test ratio(ivy Gearing ratioWhich of the above KPIs would be used to assess the liquidity Of a company? A) (i) and (ii). B) (iii) only. C) (iv) only. D) (iii) and (iv). Show Answer Correct Answer: B) (iii) only. 18. All of the following statements regarding the accounting period concept are correct, except for? A) It allows for comparisons from year to year, and with other businesses. B) Areas of concern can be identified and recommendations given. C) It assumes the lifetime of a business is indefinite. D) Most business complete financial statements at the end of each financial year, while others may also do this more regularly. Show Answer Correct Answer: C) It assumes the lifetime of a business is indefinite. 19. Calculate the amount for current liabilities.Fixtures $ 1 000 Loan $ 10 000 Trade payables $ 6 000Discount received $ 400 Bank overdraft $ 700 A) $ 11 000. B) $ 16 700. C) $ 16 000. D) $ 6 700. Show Answer Correct Answer: D) $ 6 700. 20. What is the cash method of accounting? A) Tracking the cash inflows and outflows of a business. B) Calculating the profitability of a business. C) Recognizing revenue when cash is received and recording expenses when cash is paid out. D) Recognizing revenue as it's earned and recording expenses as they are incurred. Show Answer Correct Answer: C) Recognizing revenue when cash is received and recording expenses when cash is paid out. 21. Charlotte, Evelyn, and Ethan are playing a game of 'Financial Wizards.' They need to identify the main components of a cash flow statement. Can you help them? A) Income statement, balance sheet, and statement of retained earnings. B) Sales activities, marketing activities, and production activities. C) Cash inflows, cash outflows, and cash reserves. D) Operating activities, investing activities, and financing activities. Show Answer Correct Answer: D) Operating activities, investing activities, and financing activities. 22. Define what Financial Ratios are and how they are used in analysis. A) Financial Ratios are used in analysis to measure the physical assets of a company. B) Financial Ratios are used in analysis to predict future stock prices. C) Financial Ratios are used in analysis to evaluate a company's financial performance by analyzing relationships between different financial variables. D) Financial Ratios are used in analysis to determine employee satisfaction levels. Show Answer Correct Answer: C) Financial Ratios are used in analysis to evaluate a company's financial performance by analyzing relationships between different financial variables. 23. Cash deposited into bank will result in ..... of cash A) Inflow. B) Outflow. C) No flow. D) All. Show Answer Correct Answer: C) No flow. 24. The typical set of financial statements of company consist of: A) SOPL and SOFP. B) SOCIE. C) SOCF. D) Notes to the financial statements. E) All the above. Show Answer Correct Answer: E) All the above. 25. Which of the following accurately represents the statement of financial position for a sole-trader? A) Assets = liabilities + capital. B) Capital = assets + liabilities. C) Liabilities = capital-assets. D) Assets = liabilities-capital. Show Answer Correct Answer: A) Assets = liabilities + capital. 26. A company's quick ratio has increased from 0.9:1 at 31 December 20X1 to 1.5:1 at 31 December 20X2. Which of the following events could explain this increase? A) A reduction in payables. B) The refinancing of a long-term loan. C) An increase in payables. D) Improved inventory control. Show Answer Correct Answer: A) A reduction in payables. 27. Supplies, Prepaid Insurance, Petty Cash A) Income Statement. B) Balance Sheet. C) All the above. D) None of the above. Show Answer Correct Answer: B) Balance Sheet. 28. ''interest accrued on investment" is shown under the companies balance sheet under the main head A) Other non-current assets. B) Current assets. C) Non current investment. D) Other current assets. Show Answer Correct Answer: B) Current assets. 29. Which of the following is not a right of a common stockholder? A) Right to share in the profits and losses of the corporation. B) Right to dividends each year. C) Right to a share in the company's assets at the time of liquidation. D) Right to vote. Show Answer Correct Answer: B) Right to dividends each year. 30. Interim dividend is dividend declared and paid in the middle of the financial year. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: A) True. 31. Binny Co has annual sales of and a current ratio of 3.2:1. All of its sales are forcash and are priced at a mark-up on cost Of 50%. The average cash balance is $ 40, 000 andthe inventory holding period is 90 days.Assuming 360 days in a year, what is Binny CO's quick ratio (acid test ratio)? A) 1.56. B) 0.64. C) 0.80. D) 0.53. Show Answer Correct Answer: B) 0.64. 32. Securities Premium Reserve is shown on the liabilities side in the Balance sheet under the head A) Reserves and Surplus. B) Current Liabilities. C) Share Capital. D) None of these. Show Answer Correct Answer: A) Reserves and Surplus. 33. Share Forfeiture Account appears in a Company's Balance Sheet under the Sub-head ..... A) Contingent Liability. B) Share Capital. C) Commitments. D) Reserve & Surplus. Show Answer Correct Answer: B) Share Capital. 34. When completing your Comparative Income Statement, your Wages Expense in Year 1 is $ 55, 000 and in Year 2 it is $ 53, 000. What is the percentage increase or decrease from Year 1 to Year 2? A) Decrease of 3.64%. B) Increase of 3.64%. C) Increase of 3.77%. D) Increase of 10.03%. Show Answer Correct Answer: A) Decrease of 3.64%. 35. While preparing the Balance Sheet of a company, Underwriting Commission is shown under which head? A) Non Current Assets. B) Unamortised Expenditure. C) Current Liabilities. D) Current Assets. Show Answer Correct Answer: B) Unamortised Expenditure. 36. Avery, David, and Charlotte are discussing the purpose of a balance sheet. Can you help them understand what it is for? A) Forecasting future financial performance of a company. B) Providing a snapshot of a company's financial position at a specific point in time. C) Tracking the daily expenses of a company. D) Measuring the market value of a company's assets. Show Answer Correct Answer: B) Providing a snapshot of a company's financial position at a specific point in time. 37. How will the acid-test ratio be calculated? A) Current Assets:Current Liabilities. B) Current Assets + Inventory:Current Liabilities. C) Current Assets-Inventory:Current Liabilities. D) Assets:Liabilities. Show Answer Correct Answer: C) Current Assets-Inventory:Current Liabilities. 38. Analysis of the statement of financial position of Charon for the year ended 20X9 reveals the following relationships:Current ratio 2:1Sales:current assets-5:1Acid test ratio-1.5:1If the sales for the year were $ 30 million, what is the value of inventory that will appear in the statement of financial position? A) $ 3.0m. B) $ 1.5m. C) $ 10.5m. D) $ 4.5m. Show Answer Correct Answer: B) $ 1.5m. 39. Expense for salespersons to travel for selling goods A) Distribution cost. B) Administrative cost. C) Cost of Goods sold. D) Finance cost. Show Answer Correct Answer: A) Distribution cost. 40. Which users of the financial statements read the financials to understand the profitability, liquidity, and cash flows of the organization? A) Employees. B) Company Management. C) Competitors. D) Customers. Show Answer Correct Answer: B) Company Management. 41. Aiden, Liam, and Ava are running a lemonade stand. They are trying to calculate their gross profit. Can you help them figure out the correct formula? A) Gross Profit = Revenue-Cost of Lemonade. B) Gross Profit = Revenue / Cost of Lemonade. C) Gross Profit = Revenue + Cost of Lemonade. D) Gross Profit = Revenue * Cost of Lemonade. Show Answer Correct Answer: A) Gross Profit = Revenue-Cost of Lemonade. 42. Kai, Jackson, and Oliver are playing a game about financial statements. They need to identify which statement shows the net income or loss of a company. Can you help them? A) Balance sheet. B) Income statement. C) Cash flow statement. D) Statement of retained earnings. Show Answer Correct Answer: B) Income statement. 43. The interest rate on borrowed money is 14%.When the return on capital employed is 16% it means ..... A) Loans have not been paid. B) The company is negatively geared. C) The company has very little debt. D) The company is positively geared. Show Answer Correct Answer: D) The company is positively geared. 44. After proposing a final dividend, Kenilworth Co has a current ratio of 2.0 and a quick ratio of 0.8.If the company now uses its positive cash balance to pay that final dividend, what will be the effect upon these two ratios? A) Increase current ratio and decrease quick ratio. B) Increase current ratio and increase quick ratio. C) Decrease current ratio and decrease quick ratio. D) Decrease current ratio and increase quick ratio. Show Answer Correct Answer: C) Decrease current ratio and decrease quick ratio. 45. What is the accounting equation that the balance sheet must adhere to? A) Assets + Liabilities = Equity. B) Assets = Liabilities + Equity. C) Assets-Liabilities = Equity. D) Assets = Liabilities-Equity. Show Answer Correct Answer: B) Assets = Liabilities + Equity. 46. Which of the following is a ratio which is used to measure how much a business owes in relation to its size? A) Asset turnover. B) Return on capital employed. C) Gearing. D) Profit margin. Show Answer Correct Answer: C) Gearing. 47. Short-term Borrowings appear in a Company's Balance Sheet under the head ..... A) Current Assets. B) Current Liabilities. C) Non-Current Liabilities. D) Non-Current Assets. Show Answer Correct Answer: B) Current Liabilities. 48. Expense on an asset used for sales A) Office equipment repairs. B) Repairs on shop fittings. C) Insurance-building. D) Drawings. Show Answer Correct Answer: B) Repairs on shop fittings. 49. As per Companies Act, the BALANCE SHEET of a company ie required to be presented in ..... A) Horizontal Form. B) Vertical Form. C) Either horizintal or vertical. D) Neither of the above. Show Answer Correct Answer: B) Vertical Form. 50. A public limited company is under a legal duty to disclose information to A) Banks. B) Customers. C) Shareholders. D) Suppliers. Show Answer Correct Answer: C) Shareholders. 51. Cash & Cash Equivalent Includes A) Balances with banks. B) Cheques, drafts on hand. C) Cash on hand. D) All of the above. Show Answer Correct Answer: D) All of the above. 52. Calls in advance appear in the balance sheet under A) Current liability. B) Share capital. C) Long term-borrowings. D) Reserves and surplus. Show Answer Correct Answer: A) Current liability. 53. Give an example of a common Financial Ratio and explain its significance. A) Debt-to-Equity ratio. B) Net Profit Margin ratio. C) Price-to-Earnings (P/E) ratio. D) Return on Investment (ROI) ratio. Show Answer Correct Answer: C) Price-to-Earnings (P/E) ratio. 54. Final dividend payable will be disclosed in the SOFP under current liabilities. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: A) True. 55. Under which heading the item ' Bills Discounted but not yet matured' will be shown in the balance sheet of a company? A) Contingent Liability. B) Unamortised Expenditure. C) Current Liability. D) Current Assets. Show Answer Correct Answer: A) Contingent Liability. 56. The users' needs for financial information are as follows, except A) Creditors are interested to know how the wealth is generated. B) Companies registered submit their annual financial statements as required by the Companies Act 1965. C) Employees are interested to know about the future growth prospects. D) Potential investors are interested to know about its profit assurance. Show Answer Correct Answer: B) Companies registered submit their annual financial statements as required by the Companies Act 1965. 57. Salesmen's commission should be treated under: A) Finance costs. B) Distribution cost. C) Administrative expenses. D) Other income. Show Answer Correct Answer: B) Distribution cost. 58. Trade Investment appear in a Company's B/S under the sub head ..... A) Current Investments. B) Non Current Investments. C) Intangble Assets. D) Short Term Loans and Advances. Show Answer Correct Answer: A) Current Investments. 59. List the types of Financial Statements typically prepared by companies. A) Equity Statement. B) Revenue Statement. C) Income Statement, Balance Sheet, Cash Flow Statement, Statement of Stockholders' Equity. D) Profit Statement. Show Answer Correct Answer: C) Income Statement, Balance Sheet, Cash Flow Statement, Statement of Stockholders' Equity. 60. What key information does an Income Statement provide? A) Financial performance metrics such as revenues, expenses, net income, and earnings per share. B) Weather forecast, Historical events, Future predictions. C) All the above. D) None of the above. Show Answer Correct Answer: A) Financial performance metrics such as revenues, expenses, net income, and earnings per share. ← PreviousNext →Related QuizzesCommerce QuizzesClass 12 QuizzesClass 12 Accountancy Chapter 7 Financial Statements Of Companies Quiz 1Class 12 Accountancy Chapter 7 Financial Statements Of Companies Quiz 3Class 12 Accountancy Chapter 7 Financial Statements Of Companies Quiz 4Class 12 Accountancy Chapter 7 Financial Statements Of Companies Quiz 5Class 12 Accountancy Chapter 1 Accounting For Partnership Firms Fundamentals QuizClass 12 Accountancy Chapter 2 Accounting For Partnership Firms Admission Of A Partner QuizClass 12 Accountancy Chapter 3 Accounting For Partnership Firms Retirement Death Of A Partner QuizClass 12 Accountancy Chapter 4 Accounting For Companies Issue Of Shares Quiz 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books