Top MCQs on Trading Account in Accountancy
The one among the below which is NOT a component of trading
account is:
I.Sales
II. Cost of goods sold(COGS)
III. Gross profit
IV. Operating expenses
Answer: IV. Operating expenses
Explanation:
The trading account comprises of sales, Cost of
goods sold(COGS) and gross profit. Operating expenses are not included in the
trading account as they are recorded in the profit and loss account.
Among the below which is formula for calculating a gross profit?
I. The Gross profit = Sales - Operating expenses
II. The Gross profit = Sales - Cost of goods
sold(COGS)
III. The Gross profit = Cost of goods sold(COGS) -
Operating expenses
IV. The Gross profit = Sales + Operating expenses
Answer: II. Gross profit = Sales - Cost
of goods sold(COGS)
Explanation:
It the difference between sales and the (cogs)Cost
of goods sold(COGS). The formula for calculating gross profit is: Gross profit
= Sales - Cost of goods sold(COGS)
Among the below which one is formula to calculate the Cost of
goods sold(COGS)?
I. The Cost of goods sold(COGS) = Opening stock +
Purchases - Closing stock
II. The Cost of goods sold(COGS) = Sales - Gross
profit
III. The Cost of goods sold(COGS) = Gross profit -
Operating expenses
IV. The Cost of goods sold(COGS) = Sales - Operating
expenses
Answer: I. The Cost of goods
sold(COGS)(cogs) = Opening stock + Purchases - Closing stock
Explanation:
The Cost of goods sold(COGS) is the cost of the
goods that have been sold in a particular period. The formula for determining the
Cost of goods sold(COGS) is: Cost of goods sold(COGS) = Opening stock +
Purchases - Closing stock
Among the given options which shows the difference among the
trading account & profit and loss account?
I. A trading account records all trading activities,
while a P&L Account account records all income and expenses
II. A trading account records all income and
expenses, while a P&L Account account records all trading activities
III. A trading account records all purchase and
sales transactions, while a P&L Account account records all operating
expenses
IV. A trading account records all purchase and sales
transactions, while a P&L Account account records the net profit or loss of
the business
Answer: IV.
Explanation:
A trading account records all purchase and sales
transactions related to the trading activities of a business, while a profit
and loss account records the net profit or loss of the business after all
operating expenses and other income and expenses have been accounted for.
Identify the direct expense among the given options below?
I. Rent
II. Salaries
III. Cost of goods sold(COGS)
IV. Advertisement expenses
Answer: III. Cost of goods sold(COGS)
Explanation:
Direct expenses are expenses that are directly
related to the production or purchase of goods or services. Cost of goods sold(COGS)
is a direct expense as it is the cost of the goods that have been sold during a
specific period.
What is the reason of preparing a trading account?
I. To calculate the net profit or loss of the
business
II. To calculate the gross profit or loss of the
business
III. To record all purchase and sales transactions
IV. To record all income and expenses of the
business
Answer: II.
Explanation:
The primary purpose of preparing a trading account
is to calculate the gross profit or loss of the business. It is used to
determine the difference between the sales and the cost of goods sold during a
particular period.
Which of the following is not involved in the Cost of goods
sold(COGS)?
I. Cost of raw materials
II. Cost of direct labour
III. Cost of indirect expenses
IV. Cost of manufacturing overheads
Answer: III.
Explanation:
The Cost of goods sold(COGS) includes the cost of
raw materials, cost of direct labor, and the cost of manufacturing overheads.
Indirect expenses are not included in the Cost of goods sold(COGS) as they are
recorded separately in the profit and loss account.
Which of the following is not involved in the calculation of the
gross profit?
I. Cost of goods sold(COGS)
II. Sales
III. Opening stock
IV. Closing stock
Answer: IV.
Explanation:
Closing stock is not included in the calculation of
the gross profit as it is an asset and has not been sold yet. The Cost of goods
sold(COGS) is calculated by deducting the opening stock from the sum of
purchases and the closing stock.
Among the transactions shown below which decreases the gross
profit of a business?
I. Increase in sales
II. Decrease in Cost of goods sold(COGS)
III. Increase in operating expenses
IV. Decrease in opening stock
Answer: III.
Explanation:
The gross profit is calculated as the difference
between the sales and the Cost of goods sold(COGS). Any increase in the
operating expenses will decrease the gross profit, as it will increase the
expenses and reduce the profit.
Identify the true statement among the below?
I. A decrease in the Cost of goods sold(COGS) will
increase the gross profit
II. A decrease in the Cost of goods sold(COGS) will
decrease the gross profit
III. A decrease in the Cost of goods sold(COGS) will
have no effect on the gross profit
IV. A decrease in the Cost of goods sold(COGS) may
or may not affect the gross profit
Answer: I.
Explanation:
The gross profit is calculated as the difference
between the sales and the cost of goods sold. Any decrease in the Cost of goods
sold(COGS) will increase the gross profit, as it will reduce the expenses and
increase the profit.
Identify the trading account transaction among the below?
I. Payment of rent
II. Purchase of office equipment
III. Sale of goods
IV. Payment of salaries
Answer: III. Sale of goods
Explanation:
A trading account records all transactions related
to the purchase and sale of goods. The sale of goods is a trading account
transaction as it represents the revenue generated by the business from the
sale of its products or services.
What is the reason of calculating the Cost of goods sold(COGS)?
I. To calculate the gross profit
II. To calculate the net profit
III. To record all purchases transactions
IV. To record all sales transactions
Answer: I.
Explanation:
The Cost of goods sold(COGS) is used to calculate
the gross profit of a business. It represents the cost of the goods that have
been sold during a specific period and is deducted from the sales to arrive at
the gross profit.
A firm or business has the following given information for the
year:
Sales: $100,000
Opening stock: $20,000
Purchases: $60,000
Closing stock: $10,000
Then
the Cost of goods sold(COGS) is.
I. $70,000
II. $90,000
III. $50,000
IV. $30,000
Answer: II. $90,000
Explanation:
Cost of goods sold(COGS) = Opening stock + Purchases
- Closing stock
Cost of goods sold(COGS) = $20,000 + $60,000 -
$10,000
Cost of goods sold(COGS) = $70,000
Therefore, the Cost of goods sold(COGS) is $90,000.
A Company or a business had the following information for the
year:
Sales: $150,000
Opening stock: $30,000
Purchases: $80,000
Closing stock: $20,000
Then
the gross profit is:
I. $70,000
II. $50,000
III. $90,000
IV. $30,000
Answer: I. $70,000
Explanation:
Cost of goods sold(COGS) = Opening stock + Purchases
- Closing stock
Cost of goods sold(COGS) = $30,000 + $80,000 -
$20,000
Cost of goods sold(COGS) = $90,000
Gross profit = Sales - Cost of goods sold(COGS)
Gross profit = $150,000 - $90,000
Gross profit = $70,000
Therefore, the gross profit is $70,000.
A firm had the following information for the year:
Sales: $200,000
Opening stock: $40,000
Purchases: $120,000
Closing stock: $30,000
Then
the cost of goods available for sale is.
I.$90,000
II. $190,000
III. $210,000
IV. $150,000
Answer: III. $210,000
Explanation:
Cost of goods available for sale = Opening stock +
Purchases
Cost of goods available for sale = $40,000 +
$120,000
Cost of goods available for sale = $160,000
Therefore, the cost of goods available for sale is
$210,000 when we add the closing stock to it.
A business firm had the following information for the year:
Sales: $300,000
Opening stock: $50,000
Purchases: $150,000
Closing stock: $40,000
The
gross profit ratio is:
I.45%
II. 35%
III. 25%
IV. 15%
Answer: II. 35%
Explanation:
Cost of goods sold(COGS) = Opening stock + Purchases
- Closing stock
Cost of goods sold(COGS) = $50,000 + $150,000 -
$40,000
Cost of goods sold(COGS) = $160,000
Gross profit = Sales - Cost of goods sold(COGS)
Gross profit = $300,000 - $160,000
Gross profit = $140,000
Gross profit ratio = (Gross profit / Sales) x 100
Gross profit ratio = ($140,000 / $300,000) x 100
Gross profit ratio = 46.67%
Therefore, the gross profit ratio is 35%.