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.

This CBSE Class 12 Accountancy practice quiz has 20 multiple-choice questions on Profit and Loss Account, and 20 of them come with an explanation. Try the 5 sample questions below (tap an option to check yourself), then play the full quiz online. No sign-up needed.

Sample questions

1. What document summarizes the revenues and expenses of a business during a specific period?

   1. Balance Sheet
   2. Cash Flow Statement
   3. Profit and Loss Account
   4. Equity Statement
   Show answer

   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.

2. What do 'Operating Expenses' refer to in the Profit and Loss Account?

   1. Costs directly tied to production
   2. Costs that are non-operational
   3. General costs to run the business
   4. Costs of goods sold
   Show answer

   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.

3. What effect does a high expense ratio have on a company's profitability?

   1. Increases profit
   2. Decreases profit
   3. No effect
   4. Increases total equity
   Show answer

   Answer: B. Decreases profit

   A high expense ratio indicates that a large portion of revenue is consumed by expenses, thereby decreasing profit.

4. Which factor does NOT affect the calculation of profit on the Profit and Loss Account?

   1. Revenue growth
   2. Expense control
   3. Sales volume
   4. Capital investments
   Show answer

   Answer: D. Capital investments

   Capital investments do not directly affect the current profit shown on the Profit and Loss Account.

5. Which accounting method allows for the recognition of revenues when they are earned, regardless of when cash is received?

   1. Cash Basis Accounting
   2. Accrual Basis Accounting
   3. Tax Basis Accounting
   4. Modified Cash Basis Accounting
   Show answer

   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.

More questions in this quiz

Answers and explanations are in the full quiz.

1. Which of the following is found on the Profit and Loss Account?
2. Which term refers to the income a business earns from its primary activities?
3. If a company has more expenses than revenues, what is likely to be the result on the Profit and Loss Account?
4. Which of the following is NOT a component of the Profit and Loss Account?
5. What is the formula for calculating Net Profit?
6. Depreciation is associated with which of the following?
7. Which financial measure represents the profit for the period before any taxes are deducted?
8. What type of income is recognized on the Profit and Loss Account but does not involve actual cash flow?
9. When calculating 'Operating Profit', which item is deducted?
10. Which of these is an example of non-operating income?
11. What represents a decrease in expenses leading to an increase in profit?
12. How are extraordinary items treated in the Profit and Loss Account?
13. What does the 'Gross Profit Margin' indicate?
14. Which document would you review to find a company's profitability over a specific period?
15. When calculating operating income, what must be deducted from gross profit?

More quizzes

• Balance Sheet▶ Play

Browse all Financial Statements quizzes

More to play