This quiz works best with JavaScript enabled. Home > Cbse > Class 12 > Commerce > Accountancy > Class 12 Accountancy Chapter 7 Financial Statements Of Companies – Quiz 3 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Class 12 Accountancy Chapter 7 Financial Statements Of Companies Quiz 3 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. What are financial statements? A) Records that show the employee salaries of a business. B) Statements that track the inventory of a business. C) Documents that outline the marketing strategies of a business. D) Reports that summarize the activities and financial performance of a business. Show Answer Correct Answer: D) Reports that summarize the activities and financial performance of a business. 2. What happens to the values of assets and liabilities in the balance sheet when financial statements are not adjusted for inflation? A) They appear inordinately low. B) They appear inordinately high. C) They remain unchanged. D) They become irrelevant. Show Answer Correct Answer: A) They appear inordinately low. 3. Examples may include salaries, utilities, rent, insurance, and office supplies. A) Expense. B) Net Loss. C) Revenue. D) Net Income. Show Answer Correct Answer: A) Expense. 4. The working capital of a business is the difference between: A) Total assets and total liabilities. B) Total quick assets and total current liabilities. C) Total current assets and total current liabilities. D) None of the above. Show Answer Correct Answer: C) Total current assets and total current liabilities. 5. Which of the the following won't help you to identify the return of shareholders in a company. A) DPS. B) NAV. C) EPS. D) ROL. Show Answer Correct Answer: D) ROL. 6. The accounting principle meaning that when in doubt, the accountant should choose the method that will be least likely to overstate assets and revenue is called A) The matching principle. B) Materiality. C) The monetary unit assumption. D) Prudence. Show Answer Correct Answer: D) Prudence. 7. The Income Statement has the following sections A) Liabilities. B) Revenue. C) Equity. D) Expenses. E) Assets. Show Answer Correct Answer: D) Expenses. 8. Stock at the beginning of the year A) Drawings. B) Sales. C) Opening Inventory. D) Purchases. Show Answer Correct Answer: C) Opening Inventory. 9. A decrease in the balance of Accounts Receivable. A) Operating. B) Supplemental. C) Financing. D) Investing. Show Answer Correct Answer: A) Operating. 10. What are liabilities? A) The act of buy items. B) The money paid to employees. C) What a company owes. D) Costs of operating a business. Show Answer Correct Answer: C) What a company owes. 11. What is the purpose of preparing the Statement of Financial Performance? A) Inform stakeholders the profitability of business. B) Inform stakeholders the income and expenses of business. C) Inform stakeholders the nature of business. D) Inform stakeholders the size of business. Show Answer Correct Answer: A) Inform stakeholders the profitability of business. 12. Identify the correct statement.Statement 1-Trade Receivables outstanding for a period exceeding six months from the date they are due for payment should be separately stated.Statement 2-Bank deposits with more than twelve months maturity is not required to be disclosed separately. 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: A) Only 1 is correct. 13. Which of the following may NOT provide cash inflow to the company? A) Collection from customers. B) Sale of company car. C) Payment by employee of his loan. D) Payment of liabilities. Show Answer Correct Answer: D) Payment of liabilities. 14. The ..... is the positive difference between the selling price and the cost of goods sold. A) Net Profit. B) Gross Loss. C) Net Loss. D) Gross Profit. Show Answer Correct Answer: D) Gross Profit. 15. Office Equipment is classified as a(n) A) Fixed asset. B) Revenue. C) Current asset. D) Current liability. Show Answer Correct Answer: A) Fixed asset. 16. Pind co has a current ratio Of 1.5 and a quick ratio Of 0.9.If cash in the bank is used to pay some Of the payable, what will be the effect on thecurrent and quick ratios? A) Decrease, Increase. B) Increase, Increase. C) Increase, Decrease. D) Decrease, Decrease. Show Answer Correct Answer: C) Increase, Decrease. 17. Prepaid Expenses appear in a Company's Balance Sheet under the Sub-head ..... A) Intangible Assets. B) Short-term Loans & Advances. C) Other Current Assets. D) Other Non-Current Assets. Show Answer Correct Answer: C) Other Current Assets. 18. Decrease in revenue of a trading business A) Drawings. B) Purchase returns. C) Bad debts. D) Sales returns. Show Answer Correct Answer: D) Sales returns. 19. From the list below, which ratio calculates the solvency of a business? A) Current assets:Current liabilities. B) Long term debt:Total Liabilities. C) Total assets:Total liabilities. D) Total assets-inventory:Total Liabilities. Show Answer Correct Answer: C) Total assets:Total liabilities. 20. Henry, Olivia, and Abigail are playing a game of 'Financial Whiz Kids'. They are stuck on a question and need your help. Can you tell them what the formula for calculating total assets is? A) Total assets = Current liabilities + Non-current liabilities. B) Total assets = Current assets * Non-current assets. C) Total assets = Current assets + Non-current assets. D) Total assets = Current assets-Non-current assets. Show Answer Correct Answer: C) Total assets = Current assets + Non-current assets. 21. Calls in Advance appear in a company's Balance Sheet under ..... A) Share Capital. B) Current Liability. C) Long Term Borrowings. D) Reserve and Surplus. Show Answer Correct Answer: B) Current Liability. 22. Which of the following is not a part of the financial statement of a company? A) Profit and loss A/c. B) Balance sheet. C) Ledger account. D) Cash flow statement. Show Answer Correct Answer: C) Ledger account. 23. Income statements are also known as ..... A) Statement of financial Position. B) Profit and loss account. C) Journal. D) Double column Cash book. Show Answer Correct Answer: B) Profit and loss account. 24. What does the income statement show? A) The profitability of a business over a period of time. B) The cash inflows and outflows of a business. C) The assets, liabilities, and equity of a business. D) The marketing expenses of a business. Show Answer Correct Answer: A) The profitability of a business over a period of time. 25. What is the purpose of an Income Statement? A) To predict future stock prices. B) To determine the number of employees in a company. C) To calculate the cost of goods sold. D) To show a company's financial performance over a specific period. Show Answer Correct Answer: D) To show a company's financial performance over a specific period. 26. Zoe, Grace, and Kai are learning about finance. Can you help them identify the three main types of financial statements? A) Expense statement, liability statement, and investment statement. B) Income statement, balance sheet, and cash flow statement. C) Profit statement, equity statement, and revenue statement. D) Revenue statement, asset statement, and liability statement. Show Answer Correct Answer: B) Income statement, balance sheet, and cash flow statement. 27. Goods returned to suppliers that decrease Cost of goods sold A) Sales returns. B) Credit purchases. C) Purchase returns. D) None of the above. Show Answer Correct Answer: C) Purchase returns. 28. How to find Net Profit/(Net Loss)? A) Closing Capital-Opening Capital + Drawings. B) Opening-Drawings-Closing Capital. C) Opening Capital + Drawings. D) Closing Capital-Drawings. Show Answer Correct Answer: A) Closing Capital-Opening Capital + Drawings. 29. Which of the following are items of Expenses? A) Salaries, utilities, inventory, discount allowed. B) Salaries, utilities, insurance, discount allowed. C) Salaries, utilities, interest received, discount allowed. D) Salaries, utilities, loan, discount allowed. Show Answer Correct Answer: B) Salaries, utilities, insurance, discount allowed. 30. Which formula represents the ROTCE correctly? A) Net profit before tax + Interest expense x 100Average shareholders equity + Loans. B) Net profit after tax + Interest expense x 100Average shareholders equity + Loans. C) Net profit before tax + Interest expense x 100Average shareholders equity + all liabilities. D) Net profit after tax x 100Average shareholders equity + Loans. Show Answer Correct Answer: A) Net profit before tax + Interest expense x 100Average shareholders equity + Loans. 31. The base figure used for calculating percentages in a common size Balance Sheet is the: A) Owner's equity. B) Working capital. C) Total assets. D) Total liabilities. Show Answer Correct Answer: C) Total assets. 32. Which of the following characteristics of accounting information primarily allows users of financial statements to generate predictions about an organisation? A) Neutrality. B) Reliability. C) Timeliness. D) Relevance. Show Answer Correct Answer: D) Relevance. 33. How will the earnings per share (EPS) be calculated? A) Profit before tax / Dividends per share. B) Profit before tax / no of shares in issue. C) Profit before tax / authorized shares. D) Profit after tax / no of shares in issue. Show Answer Correct Answer: D) Profit after tax / no of shares in issue. 34. Loss of value during this year on fittings used in office A) Finance cost. B) Administrative cost. C) Cost of Goods sold. D) Distribution cost. Show Answer Correct Answer: B) Administrative cost. 35. All of the following are included in the Statement of Financial Position, except for? A) Profit. B) Vehicle expenses. C) Vehicle. D) Capital. Show Answer Correct Answer: B) Vehicle expenses. 36. The main source of revenue for a trading business A) Dividends. B) Capital. C) Sales. D) Fees received. Show Answer Correct Answer: C) Sales. 37. Annual report is issued by company to its A) Shareholders. B) Auditors. C) Management. D) Directors. Show Answer Correct Answer: A) Shareholders. 38. 9% Debentures redeemable within 12 months of the date of the balanve sheet will be shown under ..... A) Other current Liability. B) Trade Payables. C) Short Term Peovisions. D) Short Term Borrowings. Show Answer Correct Answer: A) Other current Liability. 39. Define "Don't put all your financial eggs into one basket" . A) To make fried rice. B) Put your money in different types of investment. C) High risk, high return. D) Put all your money into one type of investment. Show Answer Correct Answer: B) Put your money in different types of investment. 40. What is the net profit of a business? A) The total revenue earned by a business. B) The total expenses incurred by a business. C) The difference between revenue and expenses. D) The total assets of a business. Show Answer Correct Answer: C) The difference between revenue and expenses. 41. Tax recoverable should be treated in the SOFP under A) Non-current assets. B) Current liabilities. C) Non-current liabilities. D) Current assets. Show Answer Correct Answer: D) Current assets. 42. Which of the following is not required to be prepared under the companies Act. A) Statement of profit and loss. B) Balance sheet. C) Report of Director's and Auditor's. D) Fund flow statement. Show Answer Correct Answer: D) Fund flow statement. 43. Cash at bank is an example of a A) Current asset. B) Non-current asset. C) Equity. D) None of the above. Show Answer Correct Answer: A) Current asset. 44. ..... are short-term assets and their values are constantly changing. A) Non-Current Assets. B) Current Assets. C) All the above. D) None of the above. Show Answer Correct Answer: B) Current Assets. 45. Cash from operating activities consist of ..... A) Operational Net Profit. B) Decrease in CA. C) Increase in CL. D) All. Show Answer Correct Answer: D) All. 46. The financial statement that reports the assets, liabilities, and shareholders equity at a specific date is the: A) Balance sheet. B) Income Statement. C) Trial Balance. D) General Ledger. Show Answer Correct Answer: A) Balance sheet. 47. What is the primary purpose of employee's interest in reviewing the financial statements of their current company? A) To help employees decide whether to buy company securities. B) To determine the business's credit rating. C) To help employees assess the ability of the enterprise to provide remuneration. D) To involve employees in the financial decision-making process. Show Answer Correct Answer: C) To help employees assess the ability of the enterprise to provide remuneration. 48. Qualitative characteristics of useful financial information consist all the following except: A) Relevance. B) Comparability. C) Verifiability. D) Accrual basis. Show Answer Correct Answer: D) Accrual basis. 49. Mia, Zoe, and Aiden are playing a game of 'Financial Whiz Kids'. They stumbled upon a question that they need your help with. Can you tell them which financial statement shows the changes in a company's cash and cash equivalents over a period of time? A) Statement of Retained Earnings. B) Statement of Cash Flows. C) Income Statement. D) Balance Sheet. Show Answer Correct Answer: B) Statement of Cash Flows. 50. What is the meaning of Gross profit? A) Profit from providing loans to customers. B) Profit from providing money to customers. C) Profit from providing services to customers. D) Profit from providing goods to customers. Show Answer Correct Answer: D) Profit from providing goods to customers. 51. The following extracts relate to Company X and Company Y for 20Xl Revenue 20, 000 26, 000Cost of sales (15, 400 (21, 050)Gross profit 4, 600 4, 900Expenses 2, 460 2, 770Operating profit 2, 140 2, 180What is the operating profit margin for companies for 20XI? A) 23%, 19%. B) 10.7%, 8.38%. C) 8.38%, 10.7%. D) 12%, 10%. Show Answer Correct Answer: B) 10.7%, 8.38%. 52. All of the following statements regarding the purpose of the Statement of Financial Position are correct except for? A) Shows assets, liabilities and owner's equity. B) It is prepared at a point in time. C) It can assist users, such as bank managers, with decisions. D) Shows revenue, expenses and profit. Show Answer Correct Answer: D) Shows revenue, expenses and profit. 53. Complete this statement with the best option:'The longer the cash-flow cycle ..... ' A) The less cash the business will need. B) The lower will be the firm's working capital needs. C) The less chance there is for the business to run out of cash. D) The more working capital and cash the business will need. Show Answer Correct Answer: D) The more working capital and cash the business will need. 54. Explain the difference between assets and liabilities as seen on a Balance Sheet. A) Assets are intangible, while liabilities are tangible. B) Assets and liabilities are the same thing. C) Assets are what a company owns, while liabilities are what a company owes. D) Assets are what a company owes, while liabilities are what a company owns. Show Answer Correct Answer: C) Assets are what a company owns, while liabilities are what a company owes. 55. If a company has more expenses than revenue for the period, it has a ..... A) Net Income. B) Net Loss. C) All the above. D) None of the above. Show Answer Correct Answer: B) Net Loss. 56. Securities premium account is shown on the liabilities side in the balance sheet under the heading of ..... A) Reserves and surplus. B) Current liabilities and provisions. C) Share capital. D) Contingent liabilities. Show Answer Correct Answer: A) Reserves and surplus. 57. Luna, Anika, and Aiden are learning about income statements. They want to know how to calculate the net income. Can you help them? A) Total revenues minus total expenses. B) Total revenues plus total expenses. C) Total revenues divided by total expenses. D) Total revenues multiplied by total expenses. Show Answer Correct Answer: A) Total revenues minus total expenses. 58. "Loose tools" appear in the company's Balance Sheet under the head/sun-head A) Inventory. B) Non current Assets. C) Other Current Assets. D) Stores and spare parts. Show Answer Correct Answer: A) Inventory. 59. Which of the following is the best definition of the going concern concept? A) The entity will continue in operational existence for the foreseeable future. B) The entity will not incur losses in the next three years. C) The entity will continue to make profits for the foreseeable future. D) The entity will continue in existence forever. Show Answer Correct Answer: A) The entity will continue in operational existence for the foreseeable future. 60. Beginning Capital-Drawing + Net Income =? A) Net Earnings. B) New Capital. C) Net Income. D) Total Assets. Show Answer Correct Answer: B) New Capital. ← 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 2Class 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