Final Accounts Trading PL and Balance Sheet MCQs 2026

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

1. A only the tax office ✓
2. B owners and other stakeholders about performance and position ✓
3. C only employees ✓
4. D only banks ✓

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

1. A the daily cash balance ✓
2. B the profit or loss and financial position of a business ✓
3. C the number of employees ✓
4. D tax rates only ✓

The trading account is prepared to determine the

1. A net profit ✓
2. B cash balance ✓
3. C gross profit or gross loss ✓
4. D total assets ✓

Gross profit equals net sales minus

1. A cost of goods sold ✓
2. B all expenses ✓
3. C taxes ✓
4. D drawings ✓

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

1. A sales ✓
2. B gross profit ✓
3. C net profit ✓
4. D closing stock ✓

The profit and loss account is prepared to find the

1. A net profit or net loss ✓
2. B gross profit ✓
3. C cash flow ✓
4. D capital only ✓

The balance sheet shows a business's

1. A profit for the year ✓
2. B total sales ✓
3. C total purchases ✓
4. D assets, liabilities and capital at a particular date ✓

Carriage inwards (freight on purchases) is shown in the

1. A profit and loss account ✓
2. B trading account ✓
3. C balance sheet asset side ✓
4. D capital account ✓

Carriage outwards (freight on sales) is shown in the

1. A trading account ✓
2. B balance sheet ✓
3. C profit and loss account ✓
4. D capital account ✓

Closing stock is usually

1. A shown only in the trading account ✓
2. B ignored entirely ✓
3. C shown in both the trading account (credit) and the balance sheet (asset) ✓
4. D treated as an expense ✓

Outstanding (accrued) expenses are

1. A prepaid amounts ✓
2. B expenses incurred but not yet paid, shown as a current liability ✓
3. C an asset ✓
4. D income ✓

Prepaid expenses are shown in the balance sheet as a

1. A current liability ✓
2. B part of capital ✓
3. C revenue ✓
4. D current asset ✓

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

1. A current asset ✓
2. B current liability ✓
3. C an expense ✓
4. D part of capital ✓

Depreciation charged on fixed assets is

1. A an income ✓
2. B added to the asset ✓
3. C ignored ✓
4. D an expense debited to the profit and loss account ✓

Bad debts written off are

1. A an expense debited to the profit and loss account ✓
2. B an income ✓
3. C an asset ✓
4. D added to debtors ✓

A provision for doubtful debts is created by

1. A increasing debtors ✓
2. B an entry in the trading account ✓
3. C debiting the profit and loss account and deducting it from debtors ✓
4. D crediting capital ✓

Drawings by the owner are

1. A an expense of the business ✓
2. B deducted from capital in the balance sheet ✓
3. C an income ✓
4. D added to profit ✓

The matching concept requires that expenses be recognized

1. A when they are paid ✓
2. B in the same period as the revenues they help to earn ✓
3. C at year end only ✓
4. D when cash is received ✓

Every adjustment entry in final accounts has

1. A no effect ✓
2. B only one effect ✓
3. C three effects ✓
4. D a dual (two-fold) effect ✓

Net sales equals gross sales minus

1. A sales returns (returns inward) ✓
2. B purchases ✓
3. C opening stock ✓
4. D carriage ✓

Operating profit is

1. A gross profit only ✓
2. B net sales ✓
3. C profit from normal operations before interest and tax ✓
4. D capital ✓

Capital expenditure is expenditure that

1. A provides benefit over more than one accounting period, such as buying machinery ✓
2. B is consumed within the year ✓
3. C is a loss ✓
4. D is a drawing ✓

Revenue expenditure is

1. A buying land ✓
2. B buying a building ✓
3. C expenditure whose benefit is consumed within the current period, such as rent and wages ✓
4. D issuing shares ✓

Wages paid for installing a new machine are treated as

1. A revenue expenditure ✓
2. B capital expenditure (added to the cost of the machine) ✓
3. C a loss ✓
4. D drawings ✓

A trial balance is prepared to

1. A calculate net profit ✓
2. B show the balance sheet ✓
3. C record cash ✓
4. D check the arithmetical accuracy of the ledger ✓

Closing stock is generally valued at

1. A selling price ✓
2. B market price always ✓
3. C cost or net realizable value, whichever is lower ✓
4. D original cost only ✓

If closing stock is overvalued, the net profit will be

1. A overstated ✓
2. B understated ✓
3. C unaffected ✓
4. D zero ✓

Goods taken by the owner for personal use should be

1. A added to sales ✓
2. B added to purchases ✓
3. C ignored ✓
4. D treated as drawings and deducted from purchases ✓

A contingent liability is

1. A a current asset ✓
2. B a possible obligation depending on a future uncertain event, disclosed by note ✓
3. C an expense ✓
4. D a reserve ✓

The going concern concept assumes that a business will

1. A close soon ✓
2. B sell all its assets ✓
3. C always make a profit ✓
4. D continue to operate for the foreseeable future ✓

Under the accrual basis of accounting, revenue is recognized when

1. A cash is received ✓
2. B it is earned, regardless of when cash is received ✓
3. C the year ends ✓
4. D the owner decides ✓

The excess of current assets over current liabilities is called

1. A working capital ✓
2. B capital employed ✓
3. C fixed capital ✓
4. D reserve ✓

Sundry debtors appear on the balance sheet as a

1. A current liability ✓
2. B fixed asset ✓
3. C current asset ✓
4. D part of capital ✓

Sundry creditors appear on the balance sheet as a

1. A current liability ✓
2. B current asset ✓
3. C fixed asset ✓
4. D expense ✓

Net profit is transferred to the

1. A trading account ✓
2. B trial balance ✓
3. C suspense account ✓
4. D capital account in the balance sheet ✓

If wages are outstanding at year end, they are

1. A ignored ✓
2. B shown only as an asset ✓
3. C added to wages in the trading/P&L account and shown as a current liability ✓
4. D subtracted from capital only ✓

Return inwards means goods

1. A purchased ✓
2. B returned by customers to the business ✓
3. C returned to suppliers ✓
4. D destroyed ✓

Return outwards means goods

1. A returned by customers ✓
2. B returned by the business to its suppliers ✓
3. C sold ✓
4. D donated ✓

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

1. A fixed assets ✓
2. B goodwill ✓
3. C the most liquid assets like cash ✓
4. D capital ✓

A profit and loss appropriation account is prepared by

1. A a sole trader only ✓
2. B all businesses ✓
3. C no business ✓
4. D partnerships and companies to show distribution of profit ✓

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

1. A current liability ✓
2. B current asset ✓
3. C part of capital ✓
4. D an expense ✓

Discount allowed to customers is

1. A an income ✓
2. B added to sales ✓
3. C an expense in the profit and loss account ✓
4. D a capital item ✓

Discount received from suppliers is

1. A an income credited to the profit and loss account ✓
2. B an expense ✓
3. C added to purchases ✓
4. D a liability ✓

The two sides of a balance sheet must

1. A never be equal ✓
2. B always be equal (total assets = total liabilities plus capital) ✓
3. C show profit ✓
4. D show cash only ✓

A provision for depreciation account shows the

1. A current year's depreciation only ✓
2. B profit ✓
3. C asset cost ✓
4. D accumulated depreciation to date ✓