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
41
If the Cost of Goods Sold is Rs. 1,20,000 and the gross loss is 25% of sales, what is the total sales amount?
Answer:
Rs. 96,000
Sales = Cost of Goods Sold + Gross Loss. If Gross Loss is 25% of Sales, then Cost of Goods Sold must be 125% of Sales. Therefore, 1.25 * Sales = 1,20,000. Sales = 1,20,000 / 1.25 = 96,000.
42
Which of the following items is excluded from the valuation of closing stock in a business?
Answer:
goods sold awaiting delivery to the buyer
Closing stock includes all goods owned by the business that are held for sale. Goods sold but awaiting delivery are no longer owned by the seller as the legal title has passed to the buyer upon the sale transaction. Therefore, these goods should be excluded from the seller's inventory valuation, whereas goods with agents or on approval remain the seller's property.
43
Calculate the manager's commission if it is 10% of the net profit after charging such commission, given that the profit before commission is Rs. 77,000.
Answer:
Rs. 7,000
When commission is calculated on net profit after charging such commission, the formula is: (Profit before commission * Rate) / (100 + Rate). Here, (77,000 * 10) / 110 = 770,000 / 110 = Rs. 7,000. This ensures the commission is 10% of the remaining profit after the deduction.
44
Which of the following items is classified as a current liability on a balance sheet?
Answer:
Bills Payable
A current liability is an obligation that a company expects to settle within its normal operating cycle or within twelve months from the reporting date. Bills Payable represents a short-term debt obligation arising from trade transactions, making it a current liability. Capital and Reserve Funds are equity items, while Debentures are typically classified as long-term non-current liabilities.
45
Which of the following liabilities is excluded from the total of the balance sheet?
Answer:
Contingent liabilities
Contingent liabilities are potential obligations that may arise depending on the outcome of a future event, such as a pending lawsuit. Because they are uncertain, they do not meet the strict criteria for recognition as a liability in the balance sheet total. Instead, they are disclosed in the notes to the financial statements to provide transparency to stakeholders regarding potential future risks.
46
In the balance sheet of a company, how are assets typically classified and arranged?
Answer:
Permanence
Assets in a balance sheet are traditionally arranged in the order of permanence, meaning assets that are held for a longer duration (fixed assets) are listed first, followed by more liquid assets. This convention helps stakeholders understand the liquidity profile of the entity's resource base.
47
Given an opening stock of Rs. 7,000, purchases of Rs. 23,000, and a Cost of Goods Sold (COGS) of Rs. 21,000, calculate the closing stock as of January 31, 2003.
Answer:
Rs. 9,000
The formula for Cost of Goods Sold is: Opening Stock + Purchases - Closing Stock = COGS. Substituting the given values: 7,000 + 23,000 - Closing Stock = 21,000. This simplifies to 30,000 - Closing Stock = 21,000. Therefore, the closing stock equals 30,000 - 21,000, which results in Rs. 9,000.
48
Evaluate the assertion: Increasing the value of closing inventory increases profit, and the reason: Increasing the value of closing inventory reduces the cost of goods sold.
Answer:
Both (A) and (R) are true
Cost of Goods Sold (COGS) is calculated as Opening Stock + Purchases - Closing Stock. Therefore, a higher closing inventory value directly reduces the COGS. Since profit is Revenue minus COGS, a lower COGS results in a higher gross profit, making both the assertion and the reason logically correct.
49
At what specific point in time does a balance sheet represent the financial position of an entity?
Answer:
Date
A balance sheet is a statement of financial position as of a specific date, often referred to as a 'snapshot' of the company's assets, liabilities, and equity. Unlike an income statement which covers a period, the balance sheet reflects the cumulative financial status at the close of business on that exact date.
50
Which of the following items is classified as a current asset on a balance sheet?
Answer:
Account receivable
Accounts receivable are classified as current assets because they represent amounts owed to the business by customers that are expected to be converted into cash within one operating cycle or one year, whichever is longer. Other options listed are either liabilities or long-term assets.