This quiz works best with JavaScript enabled. Home > Cbse > Class 12 > Commerce > Accountancy > Class 12 Accountancy Chapter 8 Analysis Of Financial Statements – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Class 12 Accountancy Chapter 8 Analysis Of Financial Statements Quiz 1 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. During vertical analysis, what serves as the base amount on an income statement? A) Owner's equity. B) Beginning inventory. C) Total assets. D) Sales revenue. Show Answer Correct Answer: D) Sales revenue. 2. Sales-Cost of Goods Sold = Operating profit A) TRUE. B) FALSE. C) All the above. D) None of the above. Show Answer Correct Answer: B) FALSE. 3. Net Profit is calculated by subtracting ..... from Gross Profit. A) Cost of Goods Sold. B) Total Expenses. C) Sales. D) Inventory. Show Answer Correct Answer: B) Total Expenses. 4. As required by ISA 500 and audit evidence to draw reasonable conclusions on which to base the auditor's opinion is obtained by performing: A) Risk assessment procedures. B) Tests of controls. C) Substantive procedures. D) All three of the above. Show Answer Correct Answer: D) All three of the above. 5. What is the significance of the statement of cash flows in financial reporting? A) The statement of cash flows is used to calculate revenue. B) The statement of cash flows provides information on a company's fixed assets. C) The statement of cash flows is crucial for understanding a company's cash position and financial health. D) The statement of cash flows is only relevant for tax purposes. Show Answer Correct Answer: C) The statement of cash flows is crucial for understanding a company's cash position and financial health. 6. Limitation of financial analysis is A) Dressing. B) Window. C) Window Dressing. D) None. Show Answer Correct Answer: C) Window Dressing. 7. Analysis of Financial Statements is significant: A) For Creditors. B) For Managers. C) For Employees. D) For all of the above. Show Answer Correct Answer: D) For all of the above. 8. The owner's equity was 25% in 2021 and 15% in 2022. Should the owner be satisfied? A) Yes. B) No. C) This is not the correct ratio to determine. D) None of the above. Show Answer Correct Answer: B) No. 9. Which type of accounting is more detailed and contains strategic information? A) Financial accounting. B) Managerial accounting. C) Tax accounting. D) Both financial and tax accounting. Show Answer Correct Answer: B) Managerial accounting. 10. AASB F.16 defines liquidity as: A) The availability of cash in the near future after taking account of financial commitments over this period. B) How much fluid is in a glass. C) Having a lot of money in the bank. D) None of the above. Show Answer Correct Answer: A) The availability of cash in the near future after taking account of financial commitments over this period. 11. Gross profit is 50000 salary is 5800 rent paid 6000 provision for doubtful debts 2, 000 (old) commission credit 4000 calculate net profit of the firm A) 42200. B) 42000. C) 45000. D) 40000. Show Answer Correct Answer: A) 42200. 12. The percent of property, plant and equipment to total assets is an example of: A) Solvency analysis. B) Profitability analysis. C) Horizontal analysis. D) Vertical analysis. Show Answer Correct Answer: D) Vertical analysis. 13. An income statement, besides reporting revenue and expenses, indicates what about a business? A) Share price movements by week. B) Financial progress over a fiscal period. C) Exact cash on hand each day. D) Inventory quantities by SKU. Show Answer Correct Answer: B) Financial progress over a fiscal period. 14. Which of the following items will not appear on the income statement of a service business? A) Expenses. B) Cost of goods sold. C) Net Profit. D) Revenue. Show Answer Correct Answer: B) Cost of goods sold. 15. What is the value of return on asset? A) 5.06%. B) 4.59%. C) 4.87%. D) 5.28%. Show Answer Correct Answer: C) 4.87%. 16. In vertical Revenue statement interim dividend paid is classifie Finance expenses A) TRUE. B) FALSE. C) All the above. D) None of the above. Show Answer Correct Answer: B) FALSE. 17. How does the income statement link to the balance sheet in financial reporting? A) The income statement and balance sheet are completely unrelated. B) The income statement is used for tax purposes only and does not impact the balance sheet. C) Net income from the income statement flows into the liabilities section of the balance sheet. D) Net income from the income statement flows into the retained earnings section of the balance sheet. Show Answer Correct Answer: D) Net income from the income statement flows into the retained earnings section of the balance sheet. 18. What is the value of total asst turnover? A) 13.27%. B) 15.16%. C) 14.38%. D) 14.72%. Show Answer Correct Answer: D) 14.72%. 19. Why does the auditor should design and perform tests of controls? A) Internal control is found to be weak by the auditor. B) The auditor needs to carry out his audit as to rely on internal controls. C) To obtain sufficient appropriate audit evidence as to the operational effectiveness of relevant controls. D) To obtain the information on client 's objectives, activities, financial position and related with assessing risk. Show Answer Correct Answer: C) To obtain sufficient appropriate audit evidence as to the operational effectiveness of relevant controls. 20. Closing stock is valued at A) Net realizable value. B) Cost or net realisable value whichever is less. C) Cost. D) Cost or net realisable value whichever is more. Show Answer Correct Answer: B) Cost or net realisable value whichever is less. 21. What is the significance of the income statement for investors? A) Indicates profitability over a period. B) Lists the company's shareholders. C) Tracks the stock market performance. D) Shows the company's debt levels. Show Answer Correct Answer: A) Indicates profitability over a period. 22. Which of the following best describes gross profit? A) Total revenue minus cost of goods sold. B) Total expenses minus operating profit. C) Total revenue minus operating expenses. D) Total revenue minus liabilities. Show Answer Correct Answer: A) Total revenue minus cost of goods sold. 23. The amount owed by a business to its suppliers for credit purchases is called A) Accounts receivable. B) Accounts payable. C) Merchandise payable. D) Purchases on account. Show Answer Correct Answer: B) Accounts payable. 24. Comparative Statement shows ..... A) Profitability Performance. B) One year's performance. C) Financial Performance. D) Comparative Performance. Show Answer Correct Answer: D) Comparative Performance. 25. The amount of money a firm spent to buy or produce the products it sold during the period to which the income statement applies. A) Statements of Cash Flow. B) Statement of Financial Position. C) Cost of Goods Sold. D) Statement of the Comprehensive Income. Show Answer Correct Answer: C) Cost of Goods Sold. 26. Which group most directly relies on statements to monitor, control, and plan resource use? A) Advertising vendors. B) Competitors. C) Tax attorneys. D) Stakeholders. Show Answer Correct Answer: D) Stakeholders. 27. Which term describes a written summary of changes from business transactions during an accounting cycle? A) Financial statement. B) Vertical analysis. C) Income statement. D) Organizational performance. Show Answer Correct Answer: A) Financial statement. 28. Which of the following actions is LEAST LIKELY to increase ROIC? A) Increase variety in product portfolio. B) Increase sales price per item. C) Reduce net operating working capital. D) Reduce unnecessary long-term assets. Show Answer Correct Answer: A) Increase variety in product portfolio. 29. What does beta measure in the stock market? A) The dividend yield of a stock. B) The price of a stock. C) The market capitalization of a stock. D) The volatility of a stock. Show Answer Correct Answer: D) The volatility of a stock. 30. Do you agree with this statement:An income statement is a financial statement that summarises a business's income and expenses during a given period of time. An income statement is also sometimes referred to as a profit and loss (P&L) statement. A) Yes. B) No. C) All the above. D) None of the above. Show Answer Correct Answer: A) Yes. 31. Penalty for late payment is an operating expense A) TRUE. B) FALSE. C) All the above. D) None of the above. Show Answer Correct Answer: B) FALSE. 32. What is more important and broader? Financial Statement Analysis or Financial Information Analysis A) Financial Statement Analysis. B) Financial Information Analysis. C) All the above. D) None of the above. Show Answer Correct Answer: B) Financial Information Analysis. 33. A rising operating ratio year over year most likely suggests what? A) Profits per dollar increasing. B) Sales growing faster than assets. C) Debt costs declining rapidly. D) Expenses consuming more of sales. Show Answer Correct Answer: D) Expenses consuming more of sales. 34. What are the types of Analysis? A) Internal Analysis. B) External Analysis. C) Both the Above. D) None of the above. Show Answer Correct Answer: C) Both the Above. 35. What is the primary purpose of an Income Statement in a sole proprietorship? A) To show the assets and liabilities at a specific point in time. B) To display the revenues and expenses over a specific period, showing net income or loss. C) To track the cash inflows and outflows during the financial year. D) To list the owner's personal expenses and investments.TagsDOK Level 1:Recall. Show Answer Correct Answer: B) To display the revenues and expenses over a specific period, showing net income or loss. 36. Horizontal analysis is also termed as dynamic analysis. A) TRUE. B) FALSE. C) All the above. D) None of the above. Show Answer Correct Answer: A) TRUE. 37. If a person fails to pay his debt, such amount is considered as- A) Bad debts. B) Bad debts recovered. C) Provision for Bad debt. D) None of these. Show Answer Correct Answer: A) Bad debts. 38. If the insurance premium paid Rs. 1, 000 and prepaid insurance Rs. 300. The amount of insurance premium shown in profit and loss account will be A) Rs. 300. B) Rs. 1, 000. C) Rs. 1, 300. D) Rs. 700. Show Answer Correct Answer: D) Rs. 700. 39. Depreciation is: A) The cost of an asset when sold. B) The loss of value of an asset over time. C) None of the answers are correct. D) The cost of an asset when purchased. Show Answer Correct Answer: B) The loss of value of an asset over time. 40. The value of the stockholders' claims to the assets of a corporation is known as A) Retained earnings. B) Stakeholder's equity. C) Stockholder's equity. D) Liabilities. Show Answer Correct Answer: C) Stockholder's equity. 41. "Cost of Goods Sold (COGS)" is defined as: A) The total expenses a company incurs in a period of time. B) The operational costs of all departments in a company. C) All of the answers are correct. D) The total cost to a business to manufacture and sell a specific product or service. Show Answer Correct Answer: D) The total cost to a business to manufacture and sell a specific product or service. 42. Adjusting Entries? A) Assign revenue to the period in which they are earned. B) Help to properly measure the period's Net Profit / Loss. C) Bring asset and liability account to correct balances. D) All of besides statements are true regarding Adjusting Entries. Show Answer Correct Answer: D) All of besides statements are true regarding Adjusting Entries. 43. What does a high debt-to-equity ratio indicate about a company's financial health? A) Stability. B) Efficiency. C) Financial risk. D) Profitability. Show Answer Correct Answer: C) Financial risk. 44. Goods taken by proprietor for personal use are deducted from ..... , ..... In the balance sheet A) Purchases. B) Capital. C) Stock. D) None of the above. Show Answer Correct Answer: B) Capital. 45. Which activity in a cash flow statement includes sources of cash from investors and banks? A) Cash flow from operating activities. B) Cash flow from investing activities. C) Cash flow from financing activities. D) All of the above. Show Answer Correct Answer: C) Cash flow from financing activities. 46. % Increase/ Decrease is method of preparation of ..... A) Income Statement. B) Common-size Statement. C) Comparative Statement. D) Balance Sheet. Show Answer Correct Answer: C) Comparative Statement. 47. The financial statement that reports income/loss along with expenses. A) Work sheet. B) Owner's equity statement. C) Balance sheet. D) Income statement. Show Answer Correct Answer: D) Income statement. 48. Each amount on a financial statement is compared with its corresponding amount on the previous statement A) Horizontal analysis. B) Vertical analysis. C) All the above. D) None of the above. Show Answer Correct Answer: A) Horizontal analysis. 49. If you want to know how a company is financed (that is, the capital structure), which of the following ratios is the LEAST useful? A) Interest coverage ratio. B) Leverage ratio. C) Debt-to-capital ratio. D) Debt-to-equity ratio. Show Answer Correct Answer: A) Interest coverage ratio. 50. Explain the purpose of the income statement. A) The income statement is used to calculate employee salaries. B) The income statement shows a company's financial performance over a specific period, typically a year, by detailing revenues, expenses, and profits. C) The income statement shows a company's social media engagement. D) The income statement details a company's physical assets. Show Answer Correct Answer: B) The income statement shows a company's financial performance over a specific period, typically a year, by detailing revenues, expenses, and profits. 51. Which of the following is not a measure of financial performance A) ROP. B) ROE. C) ROA. D) ROIC. Show Answer Correct Answer: A) ROP. 52. The industry comparisons of the entity's financial information with is as below except: A) Comparable information for prior periods. B) Anticipated results of the entity. C) At least-cost indicator for audit procedures. D) Similar industry information. Show Answer Correct Answer: C) At least-cost indicator for audit procedures. 53. Separation of business and owners is an entity concept A) TRUE. B) FALSE. C) All the above. D) None of the above. Show Answer Correct Answer: A) TRUE. 54. Discuss the importance of financial statement analysis for decision-making. A) Financial statement analysis is only useful for external stakeholders. B) Financial statement analysis helps stakeholders assess a company's financial health, performance, and risks, enabling informed decision-making. C) Financial statement analysis is irrelevant for decision-making. D) Financial statement analysis only focuses on historical data. Show Answer Correct Answer: B) Financial statement analysis helps stakeholders assess a company's financial health, performance, and risks, enabling informed decision-making. 55. A business has $ 10, 000 in opening inventory, $ 15, 000 in purchases, and $ 8, 000 in closing inventory. What is the cost of goods sold? A) $ 23, 000. B) $ 17, 000. C) $ 5, 000. D) $ 13, 000. Show Answer Correct Answer: B) $ 17, 000. 56. What is the value of return on equity A) 6.17%. B) 6.62%. C) 4.81%. D) 6.59%. Show Answer Correct Answer: B) 6.62%. 57. Balance sheet showes A) Profit and loss. B) Financial position. C) Errors of accounts. D) Total debtors. Show Answer Correct Answer: B) Financial position. 58. Common size statement cannot find out relationship between A) Sales and Capital employed. B) Sales and G.P. C) Expenses and Sales. D) Net profit and sales. Show Answer Correct Answer: A) Sales and Capital employed. 59. Currently, a company has bank loan with interest rate of 8%. Suppose the company did not use bank loan but used shareholder equity instead (while assets remain the same), which of the following statements is FALSE? A) ROA will be higher. B) Net profit margin with be higher. C) ROA will be lower. D) ROE will be lower. Show Answer Correct Answer: C) ROA will be lower. 60. Where do you find the ending balance for Retained Earnings? A) Statement of retained earnings. B) Income statement. C) Worksheet. D) Balance sheet. Show Answer Correct Answer: A) Statement of retained earnings. Next →Related QuizzesCommerce QuizzesClass 12 QuizzesClass 12 Accountancy Chapter 8 Analysis Of Financial Statements Quiz 2Class 12 Accountancy Chapter 8 Analysis Of Financial Statements Quiz 3Class 12 Accountancy Chapter 8 Analysis Of Financial Statements Quiz 4Class 12 Accountancy Chapter 8 Analysis Of Financial Statements Quiz 5Class 12 Accountancy Chapter 8 Analysis Of Financial Statements Quiz 6Class 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 Quiz 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books