Financial Statements – I

What is the central idea of the chapter "Financial Statements - I"?

1. Financial statements are prepared only for tax calculation.
2. Financial statements summarize accounting information through Trading Account, Profit and Loss Account, and Balance Sheet to determine profitability and financial position of a business.
3. Financial statements record only cash transactions.
4. Financial statements are unnecessary for businesses.

Why are Financial Statements prepared?

1. To provide useful information about business performance and financial position
2. To increase production automatically
3. To replace business decisions
4. To avoid maintaining records

Net Profit is transferred to:

1. Capital Account
2. Purchase Account
3. Sales Account
4. Cash Account

Which of the following is a liability?

1. Cash
2. Furniture
3. Creditors
4. Stock

Which item is deducted from Capital in the Balance Sheet?

1. Additional Capital
2. Drawings
3. Profit
4. Creditors

Which of the following is a current asset?

1. Machinery
2. Building
3. Debtors
4. Land

Closing Stock appears in:

1. Trading Account only
2. Balance Sheet only
3. Trading Account and Balance Sheet
4. Profit and Loss Account only

Which of the following is shown on the Balance Sheet?

1. Purchases
2. Wages
3. Assets and Liabilities
4. Sales

Which account is prepared after the Trading Account?

1. Cash Account
2. Profit and Loss Account
3. Purchase Account
4. Sales Account

Which of the following is an indirect expense?

1. Wages
2. Carriage Inward
3. Salaries
4. Factory Power

Gross Profit is transferred to which account?

1. Balance Sheet
2. Profit and Loss Account
3. Cash Account
4. Purchases Account

Which item appears on the credit side of the Trading Account?

1. Wages
2. Purchases
3. Sales
4. Carriage Inward

Which of the following is shown on the debit side of the Trading Account?

1. Sales
2. Closing Stock
3. Purchases
4. Gross Profit

Which financial statement is prepared to find out gross profit or gross loss?

1. Balance Sheet
2. Trading Account
3. Cash Flow Statement
4. Capital Account

What are Financial Statements?

1. Statements prepared only for taxation purposes
2. Statements prepared to show the financial performance and financial position of a business
3. Statements prepared only for employees
4. Statements prepared only for banks