Final Accounts Trading PL and Balance Sheet MCQs 2026

The main objective of preparing final accounts is to provide information to

1. Aonly the tax office✓
2. Bowners and other stakeholders about performance and position✓
3. Conly employees✓
4. Donly banks✓

Final accounts are prepared at the end of an accounting period to ascertain

1. Athe daily cash balance✓
2. Bthe profit or loss and financial position of a business✓
3. Cthe number of employees✓
4. Dtax rates only✓

The trading account is prepared to determine the

1. Anet profit✓
2. Bcash balance✓
3. Cgross profit or gross loss✓
4. Dtotal assets✓

Gross profit equals net sales minus

1. Acost of goods sold✓
2. Ball expenses✓
3. Ctaxes✓
4. Ddrawings✓

Cost of goods sold equals opening stock plus purchases plus direct expenses minus

1. Asales✓
2. Bgross profit✓
3. Cnet profit✓
4. Dclosing stock✓

The profit and loss account is prepared to find the

1. Anet profit or net loss✓
2. Bgross profit✓
3. Ccash flow✓
4. Dcapital only✓

The balance sheet shows a business's

1. Aprofit for the year✓
2. Btotal sales✓
3. Ctotal purchases✓
4. Dassets, liabilities and capital at a particular date✓

Carriage inwards (freight on purchases) is shown in the

1. Aprofit and loss account✓
2. Btrading account✓
3. Cbalance sheet asset side✓
4. Dcapital account✓

Carriage outwards (freight on sales) is shown in the

1. Atrading account✓
2. Bbalance sheet✓
3. Cprofit and loss account✓
4. Dcapital account✓

Closing stock is usually

1. Ashown only in the trading account✓
2. Bignored entirely✓
3. Cshown in both the trading account (credit) and the balance sheet (asset)✓
4. Dtreated as an expense✓

Outstanding (accrued) expenses are

1. Aprepaid amounts✓
2. Bexpenses incurred but not yet paid, shown as a current liability✓
3. Can asset✓
4. Dincome✓

Prepaid expenses are shown in the balance sheet as a

1. Acurrent liability✓
2. Bpart of capital✓
3. Crevenue✓
4. Dcurrent asset✓

Accrued income (income earned but not received) is shown as a

1. Acurrent asset✓
2. Bcurrent liability✓
3. Can expense✓
4. Dpart of capital✓

Depreciation charged on fixed assets is

1. Aan income✓
2. Badded to the asset✓
3. Cignored✓
4. Dan expense debited to the profit and loss account✓

Bad debts written off are

1. Aan expense debited to the profit and loss account✓
2. Ban income✓
3. Can asset✓
4. Dadded to debtors✓

A provision for doubtful debts is created by

1. Aincreasing debtors✓
2. Ban entry in the trading account✓
3. Cdebiting the profit and loss account and deducting it from debtors✓
4. Dcrediting capital✓

Drawings by the owner are

1. Aan expense of the business✓
2. Bdeducted from capital in the balance sheet✓
3. Can income✓
4. Dadded to profit✓

The matching concept requires that expenses be recognized

1. Awhen they are paid✓
2. Bin the same period as the revenues they help to earn✓
3. Cat year end only✓
4. Dwhen cash is received✓

Every adjustment entry in final accounts has

1. Ano effect✓
2. Bonly one effect✓
3. Cthree effects✓
4. Da dual (two-fold) effect✓

Net sales equals gross sales minus

1. Asales returns (returns inward)✓
2. Bpurchases✓
3. Copening stock✓
4. Dcarriage✓

Operating profit is

1. Agross profit only✓
2. Bnet sales✓
3. Cprofit from normal operations before interest and tax✓
4. Dcapital✓

Capital expenditure is expenditure that

1. Aprovides benefit over more than one accounting period, such as buying machinery✓
2. Bis consumed within the year✓
3. Cis a loss✓
4. Dis a drawing✓

Revenue expenditure is

1. Abuying land✓
2. Bbuying a building✓
3. Cexpenditure whose benefit is consumed within the current period, such as rent and wages✓
4. Dissuing shares✓

Wages paid for installing a new machine are treated as

1. Arevenue expenditure✓
2. Bcapital expenditure (added to the cost of the machine)✓
3. Ca loss✓
4. Ddrawings✓

A trial balance is prepared to

1. Acalculate net profit✓
2. Bshow the balance sheet✓
3. Crecord cash✓
4. Dcheck the arithmetical accuracy of the ledger✓

Closing stock is generally valued at

1. Aselling price✓
2. Bmarket price always✓
3. Ccost or net realizable value, whichever is lower✓
4. Doriginal cost only✓

If closing stock is overvalued, the net profit will be

1. Aoverstated✓
2. Bunderstated✓
3. Cunaffected✓
4. Dzero✓

Goods taken by the owner for personal use should be

1. Aadded to sales✓
2. Badded to purchases✓
3. Cignored✓
4. Dtreated as drawings and deducted from purchases✓

A contingent liability is

1. Aa current asset✓
2. Ba possible obligation depending on a future uncertain event, disclosed by note✓
3. Can expense✓
4. Da reserve✓

The going concern concept assumes that a business will

1. Aclose soon✓
2. Bsell all its assets✓
3. Calways make a profit✓
4. Dcontinue to operate for the foreseeable future✓

Under the accrual basis of accounting, revenue is recognized when

1. Acash is received✓
2. Bit is earned, regardless of when cash is received✓
3. Cthe year ends✓
4. Dthe owner decides✓

The excess of current assets over current liabilities is called

1. Aworking capital✓
2. Bcapital employed✓
3. Cfixed capital✓
4. Dreserve✓

Sundry debtors appear on the balance sheet as a

1. Acurrent liability✓
2. Bfixed asset✓
3. Ccurrent asset✓
4. Dpart of capital✓

Sundry creditors appear on the balance sheet as a

1. Acurrent liability✓
2. Bcurrent asset✓
3. Cfixed asset✓
4. Dexpense✓

Net profit is transferred to the

1. Atrading account✓
2. Btrial balance✓
3. Csuspense account✓
4. Dcapital account in the balance sheet✓

If wages are outstanding at year end, they are

1. Aignored✓
2. Bshown only as an asset✓
3. Cadded to wages in the trading/P&L account and shown as a current liability✓
4. Dsubtracted from capital only✓

Return inwards means goods

1. Apurchased✓
2. Breturned by customers to the business✓
3. Creturned to suppliers✓
4. Ddestroyed✓

Return outwards means goods

1. Areturned by customers✓
2. Breturned by the business to its suppliers✓
3. Csold✓
4. Ddonated✓

When assets are arranged in a balance sheet in order of liquidity, the list starts with

1. Afixed assets✓
2. Bgoodwill✓
3. Cthe most liquid assets like cash✓
4. Dcapital✓

A profit and loss appropriation account is prepared by

1. Aa sole trader only✓
2. Ball businesses✓
3. Cno business✓
4. Dpartnerships and companies to show distribution of profit✓

Income received in advance is shown in the balance sheet as a

1. Acurrent liability✓
2. Bcurrent asset✓
3. Cpart of capital✓
4. Dan expense✓

Discount allowed to customers is

1. Aan income✓
2. Badded to sales✓
3. Can expense in the profit and loss account✓
4. Da capital item✓

Discount received from suppliers is

1. Aan income credited to the profit and loss account✓
2. Ban expense✓
3. Cadded to purchases✓
4. Da liability✓

The two sides of a balance sheet must

1. Anever be equal✓
2. Balways be equal (total assets = total liabilities plus capital)✓
3. Cshow profit✓
4. Dshow cash only✓

A provision for depreciation account shows the

1. Acurrent year's depreciation only✓
2. Bprofit✓
3. Casset cost✓
4. Daccumulated depreciation to date✓