1. What are the objective of preparing financial statements ?
2. What is the purpose of preparing trading and profit and loss account ?
3. Explain the concept of cost of goods sold ?
4. What is a balance sheet . What are its characteristics ?
5. Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure :
a) Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in
order to make it usable .
b) Expenditure incurred to provide one more exit in a cinema hall in compliance with a
government order .
a) Registration fees paid at the time of purchase of a building
b) Expenditure incurred in the maintenance of a tea garden which will produce tea after four years.
c) Depreciation charged on a plant .
d) The expenditure incurred in erecting a platform on which a machine will be fixed .
e) Advertising expenditure, the benefits of which will last for four years .
6. What is an operating profit?
Long Answers
1. What are financial statements? What information do they provide .
2. What are closing entries? Give four examples of closing entries
3. Discuss the need of preparing a balance sheet.
4. What is meant by Grouping and Marshalling of assets and liabilities. Explain
the ways in which a balance sheet may be marshalled.
Numerical Questions
1. From the following balances taken from the books of Simmi and Vimmi Ltd.
for the year ending March 31, 2017, calculate the gross profit.
Closing stock 2,50,000
Net sales during the year 40,00,000
Net purchases during the year 15,00,000
Financial Statements - I 311
Opening stock 15,00,000
Direct expenses 80,000
(Ans. Gross profit `11,70,000)
2. From the following balances extracted from the books of M/s Ahuja and
Nanda. Calculate the amount of :
(a) Cost of goods available for sale
(b) Cost of goods sold during the year
(c) Gross Profit
Opening stock 25,000
Credit purchases 7,50,000
Cash purchases 3,00,000
Credit sales 12,00,000
