Profit and Loss Account Quiz - CBSE Class 12 Accountancy
Free practice quiz: Profit and Loss Account (CBSE Class 12 Accountancy). 20 multiple-choice questions with answers and explanations. Play online, no sign-up needed.
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What document summarizes the revenues and expenses of a business during a specific period?
- Balance Sheet
- Cash Flow Statement
- Profit and Loss Account
- Equity Statement
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Answer: C. Profit and Loss Account
The Profit and Loss Account summarizes the revenues and expenses to show the profitability of a business over a specific period.
What do 'Operating Expenses' refer to in the Profit and Loss Account?
- Costs directly tied to production
- Costs that are non-operational
- General costs to run the business
- Costs of goods sold
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Answer: C. General costs to run the business
Operating Expenses include costs required for the functioning of the business, excluding the cost of goods sold.
What effect does a high expense ratio have on a company's profitability?
- Increases profit
- Decreases profit
- No effect
- Increases total equity
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Answer: B. Decreases profit
A high expense ratio indicates that a large portion of revenue is consumed by expenses, thereby decreasing profit.
Which factor does NOT affect the calculation of profit on the Profit and Loss Account?
- Revenue growth
- Expense control
- Sales volume
- Capital investments
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Answer: D. Capital investments
Capital investments do not directly affect the current profit shown on the Profit and Loss Account.
Which accounting method allows for the recognition of revenues when they are earned, regardless of when cash is received?
- Cash Basis Accounting
- Accrual Basis Accounting
- Tax Basis Accounting
- Modified Cash Basis Accounting
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Answer: B. Accrual Basis Accounting
Accrual Basis Accounting records revenues when they are earned rather than when cash is exchanged, affecting the Profit and Loss Account.