Important Questions for CBSE Class 11 Accountancy Chapter 8 - Financial Statements 1

Very short answer questions (1 Mark)

1. Fill In the Blanks:

i) Wages to the worker are place at ________ side in  the trading account

Ans:   Debit

ii) Interest paid is place in the _______ account

Ans: Profit and loss 

iii) Sundry Creditors are placed at ________ side of a balance sheet

Ans: Liability 

iv) Land and building is a ______

Ans: Fixed asset

2. True-false

i) Trading account show the assets and liability of the company.

Ans: False, The company's liabilities are outstanding expenses. We refer to outstanding expenses as those that are due for payment but have yet to be paid. Outstanding expenses are a company obligation that must be met. Liability refers to a contractual duty or a financial debt that arises in the course of business. Hence. Outstanding expenses will appear on the balance sheet's liabilities side.

The outcomes of the purchasing and selling of goods are shown in a trading account. The purpose of this sheet is to show the gap between the selling price and the cost price. The trading account is prepared to demonstrate the business's trading performance, such as gross profit earned or gross loss endured.

ii) A balance sheet is prepared at last in the financial statement.

Ans: True, At the end of an accounting period, such as month-end, quarter-end, or year-end, balance sheets are typically generated.

iii) Cash in hand is placed at the asset side of the balance sheet.

Ans: True, Accounts such as cash, inventory, and property are on the asset side of the balance sheet, while accounts payable and long-term debt are on the liability side.

iv) The gross profit or loss is carried forward to the profit and loss account

Ans: The gross profit or loss is carried forward to the profit and loss account.  As a result, this statement is true.

3. What do you mean by carriage outwards?

Ans: The cost of delivering items from the seller to the buyer is known as carriage outbound.

4. What do you understand by return inward?

Ans: It is the buyer of the items returning the things.

5. How the gross loss is treated in a financial statement?

Ans: On the debit side of the profit and loss sheet, the gross loss is carried down.

Short Answer Questions (2 Marks)

1.  Who are the stakeholder of the company

Ans: Stakeholders are those who are involved with a firm, such as investors, shareholders, board of directors, and employees.

2. What do you mean by bills payable?

Ans: It displays how much money a company has received in credit for services or commodities. This is the amount that the business must pay to the service provider or the supplier of the goods within the stipulated time.

3. What do you understand by account receivable?

Ans: It displays how much money a corporation has borrowed to supply services or commodities on credit. This is the amount that the business must receive from its debtors within the stipulated time.

4. Who are the sundry debtors to the company?

Ans: A person who owns money from the corporation is referred to as a sundry debtor. They are treated by the corporation as current assets.

5. Define the term current assets.

Ans:  Cash or cash equivalents that can be turned into cash within a year are known as current assets. For instance, cash, cash equivalents, accounts payable, inventories, and so on.

Short answer questions (3 Marks)

1. 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.

2. 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.

3. 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.

4.  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

5. 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.

Long Answer Questions- 5 marks

1.  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.

2. Differentiate between Capital Expenditure and Revenue Expenditure

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

3. 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.

4. 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.

5. 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.