Chapter MCQ Test 2 — Financial Statements of a Company
10 Questions • 12 min • Chapter MCQ
12:00
Question 1 of 10
A debit (negative) balance of the Statement of Profit and Loss in the Balance Sheet is shown:
As a negative figure under Reserves and Surplus
As an asset
Under current liabilities
It is omitted
Explanation: Under Schedule III the accumulated loss is shown as a negative figure within Reserves and Surplus.
Question 2 of 10
Which set is correctly classified under CURRENT liabilities?
Trade payables, short-term borrowings, provision for tax
Long-term borrowings, goodwill
Inventories, debtors
Share capital, securities premium
Explanation: All three are current liabilities; the others are non-current liabilities, assets or shareholders' funds.
Question 3 of 10
Calls-in-advance is shown in a company's Balance Sheet under:
Other current liabilities
Share capital
Reserves and surplus
Current assets
Explanation: Calls-in-advance is a liability of the company, classified under Other current liabilities.
Question 4 of 10
Cost of materials consumed = opening materials + purchases − closing materials. If opening 50,000, purchases 4,00,000, closing 70,000, it is:
Rs 3,80,000
Rs 4,20,000
Rs 5,20,000
Rs 3,30,000
Explanation: 50,000 + 4,00,000 − 70,000 = 3,80,000.
Question 5 of 10
Why does Schedule III prescribe a fixed format for company statements?
To make statements uniform and comparable across companies and years
To increase profit
To hide losses
To avoid tax
Explanation: A standard format ensures comparability and protects users.
Question 6 of 10
Revenue from operations 60,00,000; other income 3,00,000; total expenses 48,00,000; tax 30%. Profit after tax is:
Rs 10,50,000
Rs 15,00,000
Rs 12,00,000
Rs 4,50,000
Explanation: PBT = 63,00,000 − 48,00,000 = 15,00,000; tax 4,50,000; PAT = 10,50,000.
Question 7 of 10
Capital work-in-progress (a building under construction) is shown under:
Non-current assets (fixed assets)
Current assets
Current liabilities
Other income
Explanation: CWIP is part of fixed (non-current) assets until completed.
Question 8 of 10
'Changes in inventories of finished goods' is computed as:
Opening inventory − Closing inventory
Closing − Opening
Opening + Closing
Purchases − Sales
Explanation: Opening minus closing; a positive figure (stock fell) increases the expense charged.
Question 9 of 10
A proposed dividend declared after the year-end is, under current norms, treated as:
A contingent item disclosed in notes (not a year-end liability)
A current asset
Revenue
Share capital
Explanation: Proposed dividend is now disclosed in notes and recognised when actually declared, not provided as a year-end liability.
Question 10 of 10
The two company financial statements together let users assess:
Both performance (P&L) and position (Balance Sheet)
Only cash
Only tax
Only share price
Explanation: The Statement of P&L shows performance; the Balance Sheet shows position — together a full picture.