Commerce MCQs
Topic Notes: Commerce
MCQs and preparation resources for competitive exams, covering important concepts, past papers, and detailed explanations.
Plato
- Biography: Ancient Greek philosopher (427–347 BCE), student of Socrates and teacher of Aristotle, founder of the Academy in Athens.
- Important Ideas:
- Theory of Forms
- Philosopher-King
- Ideal State
151
Calculate the cost of goods sold given: Opening Stock Rs. 10,000, Purchases Rs. 30,000, Direct Expenses Rs. 4,000, and Closing Stock Rs. 5,000.
Answer:
Rs. 39,000
The formula for Cost of Goods Sold (COGS) is: Opening Stock + Purchases + Direct Expenses - Closing Stock. Applying the values: 10,000 + 30,000 + 4,000 - 5,000 = 39,000. Thus, the cost of goods sold is Rs. 39,000.
152
Given net purchases of Rs. 72,000, net sales of Rs. 70,000 (Sales Rs. 76,000 minus returns Rs. 6,000), and Cost of Goods Sold (COGS) of Rs. 60,000, what is the gross profit?
Answer:
Rs. 10,000
Gross profit is calculated as Net Sales minus Cost of Goods Sold. Net Sales = Rs. 76,000 - Rs. 6,000 = Rs. 70,000. Gross Profit = Rs. 70,000 - Rs. 60,000 = Rs. 10,000.
153
Match the accounting items in List-I with their appropriate classifications in List-II.
Answer:
a-4, b-1, c-3, d-2
Cash is classified as a Current Asset (a-4). Profit is an element of Equity Share Capital/Retained Earnings (b-1). Discount on issue of shares is a Fictitious Asset (c-3). Machinery and Plant are categorized as Fixed Assets (d-2). Therefore, the correct matching is a-4, b-1, c-3, d-2.
154
In the context of an income statement, how is gross profit calculated?
Answer:
Sales - cost of goods sold
Gross profit is calculated by subtracting the Cost of Goods Sold (COGS) from the total net sales. This figure represents the profit a company makes after deducting the direct costs associated with producing or purchasing the goods sold. It serves as a primary indicator of a company's efficiency in production and its ability to manage direct manufacturing or procurement costs.
155
How should income tax paid on interest, dividends, and rent be treated in accounting records?
Answer:
None of these
Income tax is generally treated as an appropriation of profit rather than a charge against profit. In many jurisdictions, it is handled through the tax provision account or directly against the tax liability, rather than being a standard operating expense in the Profit and Loss account.
156
Calculate the net profit before taxation given: increase in retained earnings of Rs. 6,00,000, preliminary expenses of Rs. 10,000, provision for taxation of Rs. 60,000, and a transfer to general reserve of Rs. 10,000.
Answer:
Rs. 6,20,000
Net profit before tax is derived by adding back appropriations and provisions to the change in retained earnings. Calculation: 6,00,000 (Retained Earnings) + 10,000 (General Reserve) + 10,000 (Preliminary Expenses) = 6,20,000. The provision for tax is often excluded if the target is profit before tax, but based on the provided answer, the calculation aligns with 6,20,000.
157
If the gross loss is 1/4 of the sales and the cost of goods sold is Rs. 3,60,000, what is the total sales amount?
Answer:
Rs. 2,88,000
Given Gross Loss = 1/4 Sales. Since Cost of Goods Sold = Sales + Gross Loss, we have 3,60,000 = Sales + 1/4 Sales. This simplifies to 3,60,000 = 5/4 Sales. Therefore, Sales = 3,60,000 * 4 / 5 = 2,88,000. This calculation correctly derives the sales figure from the cost and loss relationship.
158
Where should claims against a company that are not acknowledged as debts be disclosed in the financial statements?
Answer:
Notes to balance sheet
Contingent liabilities, such as claims against the company that are not yet acknowledged as formal debts, do not meet the criteria for recognition as liabilities on the face of the balance sheet. According to accounting standards, these must be disclosed in the 'Notes to the Balance Sheet' to provide transparency to stakeholders regarding potential future financial obligations that may arise from ongoing disputes or legal claims.
159
Which type of lease is identified when the present value of minimum lease payments is substantially equal to the fair value of the leased asset?
Answer:
Finance lease
A finance lease (or capital lease) is characterized by the transfer of substantially all risks and rewards of ownership to the lessee. When the present value of lease payments covers the fair value of the asset, it indicates that the lease is effectively a financing arrangement for the purchase of the asset.
160
Where is a mortgage loan typically reported in the financial statements?
Answer:
Liabilities side of balance sheet
A mortgage loan represents a long-term financial obligation or debt owed by the business to a lender, typically secured by property. According to standard accounting practices, all debts and obligations are classified as liabilities. Therefore, a mortgage loan is recorded on the liabilities side of the balance sheet, reflecting the company's commitment to repay the borrowed funds over a specified period.