NCERT MOST IMPORTANT QUESTIONS CLASS – 11 | ACCOUNTANCY IMPORTANT QUESTIONS | CHAPTER – 9 Financial Statements – I| EDUGROWN |

NCERT Most important question:

Q1. Describe fixed assets

Ans: Fixed assets are assets that are expected to stay with the company for a long time and are not likely to be transformed into cash quickly. They are employed to generate capital revenue for the company. Land development, plant, machinery, equipment, furniture, and automobiles are only a few examples.

Q2. What are the needs to prepare a trading account?

Ans: The following are the reasons for keeping a trading account: 

i. To keep track of the company’s gross profit and gross loss.

ii. To obtain information on the company’s equity.

iii. It contains information about factory expenses.

iv. It also informs the company about the direct costs associated with the activity.

Q3. Why it is necessary for the company to prepare a profit and loss account.

Ans: The company must create a profit and loss account for the following reasons: i. It provides information on the company’s administrative expenses.

ii. The profit and loss statement determines the firm’s profitability.

iii. It aids in determining the company’s earnings per share.

Q4.  What do you mean by current liabilities and how they are treated in the financial statement?

Ans: The amount due to the creditor within a year is referred to as current liabilities. It could include a short-term loan, an account receivable, an advance, an unclaimed dividend, a variety of creditors, and income tax due, among other things. On the liabilities side of the balance sheet, current liabilities are added

Q5. Describe Earnings before interest and tax (EBIT).

Ans:  The difference between operating revenue and operating expense is known as operating profit. In other words, operating profit is the profit generated by business operations.

EBIT, or earnings before interest and taxes, is another term for operating profit. Net profit is added to non-operating expenses, and then non-operating income is subtracted to arrive at EBIT.

Q6.  State the purpose of preparing the financial statement in a business.

Ans: The objective of preparing a financial statement in a business is to:

i. Aid in the presentation of the true and fair value of the company’s performance.

ii. It aids the stakeholder in determining the company’s genuine position.

iii. It aids in determining the company’s overall profitability.

iv. It serves as the foundation for determining the annual dividend paid to shareholders.

v. It alerts the company to its flaws.

Q7. Differentiate between Capital Expenditure and Revenue Expenditure

Ans: Differentiate between Capital Expenditure and Revenue Expenditure. Given below:

Sr. No	Capital Expenditure	Revenue Expenditure
1.	It boosts the company’s earnings.	It helps to keep the company’s earning capability.
2.	It’s used to get the job done. for the fixed assetsCompany.	It is utilised for the company’s day-to-day expenses.
3.	It’s usually a one-time expense.	It is a recurrent company expense that provides advantages for one
4.	It is beneficial in more ways than one. one year or longer an era of accounting	It is a recurrent company expense that provides advantages for one accounting period.
5.	They’re written down ina financial statement	It is documented in the trading and profit and loss accounts.

Q8. Describe briefly the types of financial statements.

Ans: The two forms of financial statements created by any firm are

i. Trading and Profit & Loss Account – This account is also known as the company’s income statement since it shows the profit and loss earned by the company during a financial year. The trade account indicates the company’s gross profit from operations, whereas the profit and loss account shows the company’s net profit.

ii. The financial statement. A balance sheet is used to determine the financial position of a company’s assets and liabilities. I also assist in estimating the rate of return and reviewing the company’s capital structure.

Q9. Explain any five items of a trading account

Ans: The following are the five relative items in a trading account:

i.Opening stock: The opening stock is the previous year’s closing stock that can be used in the current year.

ii. Purchase: The gods are the things that the corporation buys from the supplier, whether on credit or in cash.

iii. Purchase return: Purchase return refers to goods that are returned to the provider.

iv. Freight inward: This refers to the expense of carriage or transportation to the company’s factory or warehouse.

v. Wages: Wages are the remuneration paid to factory workers.

Q10. Explain any five items of a profit and loss account

Ans: The five relative items in a profit and loss account are:

i. Salaries: The salaries paid to the office employee for administrative purposes. It

includes the cash salary and it is also paid in kind for accommodation, rent, transportation, medical etc.

ii. Commission paid: Commission paid to the agent for selling the goods.

iii. Electricity and power: power and electricity charges for an office building

iv. Rent: Rent paid on the office building 

v. Miscellaneous: A few little expenses are grouped together to save money.

referred to as Miscellaneous Expense.