Chapter MCQ Test 2 — Final Accounts of a Sole Proprietorship — I
10 Questions • 12 min • Chapter MCQ
12:00
Question 1 of 10
A student puts 'carriage outward' in the Trading Account. The error is that carriage outward is:
An indirect (selling) expense belonging to the P&L Account
A direct expense
An income
An asset
Explanation: Carriage inward is direct (Trading); carriage OUTWARD is a selling expense for the P&L Account.
Question 2 of 10
Sales 2,00,000; sales returns 10,000; opening stock 25,000; purchases 1,30,000; closing stock 35,000; wages 8,000. Gross profit =
Rs 62,000
Rs 72,000
Rs 52,000
Rs 60,000
Explanation: Net sales 1,90,000 + closing 35,000 = 2,25,000; Dr = 25,000+1,30,000+8,000 = 1,63,000; GP = 62,000.
Question 3 of 10
Why is closing stock shown BOTH in the Trading Account and the Balance Sheet?
Credited in Trading (to compute COGS) and shown as a current asset in the Balance Sheet
It is an error to show it twice
It is an expense and income
It is capital
Explanation: Its credit in Trading reduces cost of goods sold; the same unsold stock is an asset on the closing date.
Question 4 of 10
Net sales 5,00,000, gross profit ratio 25%. The cost of goods sold is:
Rs 3,75,000
Rs 1,25,000
Rs 6,25,000
Rs 4,00,000
Explanation: GP = 25% of 5,00,000 = 1,25,000; COGS = sales − GP = 5,00,000 − 1,25,000 = 3,75,000.
Question 5 of 10
A firm has gross profit 90,000, indirect expenses 1,00,000 and other incomes 5,000. The result is a:
Net loss of Rs 5,000
Net profit of Rs 5,000
Net profit of Rs 95,000
No profit, no loss
Explanation: Credit 90,000+5,000 = 95,000; Debit 1,00,000 → net loss of 5,000.
Question 6 of 10
Which arrangement does a balance sheet in 'order of permanence' begin with?
Goodwill / fixed assets first, cash last
Cash first
Debtors first
Stock first
Explanation: Order of permanence lists the most permanent assets first and the most liquid (cash) last.
Question 7 of 10
Net profit overstated because closing stock was overvalued by Rs 5,000 means next year's profit will be:
Understated by Rs 5,000 (this year's closing is next year's opening)
Also overstated
Unaffected
Overstated by 10,000
Explanation: An overstated closing stock becomes an overstated opening stock next year, lowering next year's gross profit.
Question 8 of 10
Wages AND salaries both appear in a trial balance. The correct treatment is:
Wages → Trading Account; Salaries → P&L Account
Both in Trading
Both in P&L
Both in Balance Sheet
Explanation: 'Wages' are a direct (factory) expense for Trading; 'salaries' are an office/indirect expense for the P&L.
Question 9 of 10
If both sides of a balance sheet do not agree, it indicates:
An error somewhere in the final accounts
High profit
Normal practice
More drawings
Explanation: Assets must equal liabilities plus capital; a mismatch signals an arithmetical or treatment error.
Question 10 of 10
Place these correctly: (i) bank overdraft, (ii) prepaid insurance. They are respectively a:
Current liability and a current asset
Current asset and a current liability
Both assets
Both liabilities
Explanation: A bank overdraft is a short-term liability; prepaid insurance is an asset (benefit receivable next year).