PROFIT AND LOSS ACCOUNT

Net profit is
1. excess of sales over the cost of goods sold.
2. sales less purchases.
3. revenues less expenses.
4. gross profit less expenses.
The following should be debited to the Profit and Loss account, except
1. carriage outwards.
2. commission revenue.
3. interest expense.
4. rent expense.
The discount allowed of $50 was wrongly recorded as discount received. What is the effect on net profit?
1. Net profit is understated by $50.
2. Net profit is understated by $100.
3. Net profit is overstated by $50.
4. Net profit is overstated by $100.
Which of the following statements is/are correct?

I. The increase in cash represents profit.

II. Profit increases capital.

III. Drawings reduce profit.

IV. Personal vehicle introduced by owner into the business increases the capital of the business.
1. I and II
2. I and IV
3. II and III
4. II and IV
Net profit is determined in the
1. Trial Balance.
2. Balance Sheet.
3. Profit and Loss Account.
4. Trading Account.
Carriage inwards $25 is wrongly recorded in the General Expenses Account.
This error results in the following effect(s):

I. Net profit is overstated by $25.

II. Gross profit is overstated by $25.

III. Gross profit remains unchanged.

IV. Net profit remains unchanged.
1. I only
2. IV only
3. I and II only
4. II and IV only
Which of the following transactions will result in a decrease in net profit?
1. Paid $100,000 to acquire land.
2. Paid $55,000 to creditors.
3. Paid commission of $2,000 to sales personnel.
4. Repaid loan $8,000.
Net profit is transferred to the credit side of
1. Capital Account
2. Trading Account
3. Profit and Loss Account
4. Cash Account
Given opening capital of $9,000, closing capital as $10,000 and drawings of $800, then
1. net profit for the year was $3,600.
2. net loss for the year was $3,600.
3. net profit for the year was $1,800.
4. net loss for the year was $1,800.
Tan buys and sells furniture for a profit. If $700 worth of goods purchased for resale are incorrectly debited to the Furniture Account,
1. net profit will be understated by $700.
2. net profit will be overstated by $700.
3. asset value will be understated by $700.
4. net profit will be unaffected.
A debit balance in the Profit and Loss Account means a
1. net loss.
2. net profit.
3. gross loss.
4. gross profit.
If wages are expenses incurred in making goods into a saleable condition, they should be charged to the
1. Trading Account.
2. Profit and Loss Account.
3. Trial Balance.
4. Balance Sheet.
Which of the following is not shown in the Profit and Loss Account?
1. Stationery
2. Carriage inwards
3. Annual business registration fee
4. Registration fee for delivery van
Gross loss is shown on the
1. credit side of the Profit and Loss Account.
2. debit side of the Profit and Loss Account.
3. credit side of the Trading Account.
4. debit side of the Trading Account.
If the capital at the end of the accounting period is $50,000, the net profit for the year is $15,000 and drawing is $3,000, what is the capital at the beginning of the period?
1. $47,000
2. $32,000
3. $38,000
4. $62,000
If other revenues received for the year are $15,000, operating expenses are $50,000 and the net profit is $35,000, the gross profit is
1. $85,000
2. $70,000
3. $50,000
4. $100,000

PROFIT AND LOSS ACCOUNT

Multiple-choice exercise