Prepare for JKSSB FAA 2026 with these important MCQs on Profit & Loss Account, specially prepared by Exam Waves. Practice key questions on net profit, net loss, operating profit, indirect expenses, incomes, and other important Accountancy concepts.
Q1. Which of the following statements correctly describe the Profit and Loss Account?
- It is a Nominal Account.
- It is prepared after the Trading Account.
- All gains and losses are recorded in it.
- Expenses and losses not recorded in the Trading Account are shown in it.
- It helps to find the net result of the business, i.e., Net Profit or Net Loss.
A) 1, 2 and 3 only
B) 1, 2, 3 and 4 only
C) 2, 3, 4 and 5 only
D) 1, 2, 3, 4 and 5
Answer: D
Q2. Consider the following rules regarding the treatment of items in the Profit and Loss Account:
- If the Trading Account shows Gross Loss, it appears on the Debit side.
- If there is Gross Profit, it appears on the Credit side.
- All expenses and losses are written on the Debit side.
- All incomes and gains are written on the Credit side.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: D
Q3. Match List I with List II and select the correct answer:
| List I | List II |
|---|---|
| A. Maintenance Expense | 1. Expenses incurred in day-to-day administration of business |
| B. Financial Expense | 2. Loss of stock due to fire |
| C. Management Expense | 3. Incurred on existing fixed assets |
| D. Abnormal Loss | 4. Interest on loan |
A) A-3, B-4, C-1, D-2
B) A-4, B-3, C-2, D-1
C) A-3, B-1, C-4, D-2
D) A-2, B-4, C-1, D-3
Answer: A
Q4. Which of the following correctly identifies the examples of Income and Gains?
- Discount received
- Commission received
- Interest on bank deposits
- Profit arising out of sale of fixed assets
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: D
Q5. Assertion (A): Profit and Loss Account is prepared to ascertain Net Profit or Net Loss.
Reason (R): One of the purposes of the Profit and Loss Account is to calculate different ratios.
Choose the correct answer:
A) Both A and R are true, and R is the correct explanation of A
B) Both A and R are true, but R is not the correct explanation of A
C) A is true, but R is false
D) A is false, but R is true
Answer: B
Q6. Which of the following correctly represents the formula for Net Profit?
A) Net Profit = Gross Profit + Other Income − Indirect Expenses
B) Net Profit = Gross Profit − Other Income + Indirect Expenses
C) Net Profit = Gross Profit + Indirect Expenses − Other Income
D) Net Profit = Gross Loss + Other Income + Indirect Expenses
Answer: A
Q7. Consider the following alternative formula for calculating Net Profit:
Net Profit = Operating Profit − Non-operating Expenses + Non-operating Income
Which of the following statements correctly follow this formula?
- Non-operating expenses reduce Net Profit.
- Non-operating income increases Net Profit.
- Operating Profit forms the starting point for the calculation.
- Non-operating expenses are added to Operating Profit.
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: B
Q8. Which of the following are examples of Non-operating Expenses?
- Loss due to fire
- Interest and tax
- Loss on sale of fixed assets
- Salary
- Postage
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3, 4 and 5 only
D) 1, 2, 3, 4 and 5
Answer: B
Q9. Assertion (A): A Non-operating Expense does not relate to the main business activity.
Reason (R): Loss due to fire, interest and tax, and loss on sale of fixed assets are given as examples of Non-operating Expenses.
Choose the correct answer:
A) Both A and R are true, and R is the correct explanation of A
B) Both A and R are true, but R is not the correct explanation of A
C) A is true, but R is false
D) A is false, but R is true
Answer: A
Q10. Which of the following groups contains only Non-operating Income?
A) Gain on sale of fixed assets, Interest received on investments and Rent received
B) Salary, Rent received and Interest on loan
C) Commission paid, Gain on sale of fixed assets and Postage
D) Interest received, Salary and Miscellaneous expenses
Answer: A
Q11. Match List I with List II and select the correct combination:
| List I | List II |
|---|---|
| A. Loss due to fire | 1. Non-operating Income |
| B. Gain on sale of fixed assets | 2. Non-operating Expense |
| C. Interest received on investments | 3. Non-operating Income |
| D. Loss on sale of fixed assets | 4. Non-operating Expense |
A) A-2, B-1, C-3, D-4
B) A-1, B-2, C-4, D-3
C) A-2, B-4, C-1, D-3
D) A-3, B-1, C-2, D-4
Answer: A
Q12. Consider the following statements regarding Operating Profit:
- It is also referred to as EBIT.
- It is profit earned during a particular period from routine business activities.
- It represents profit before interest and tax.
- Operating Profit = Gross Profit − Operating Expenses.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: D
Q13. Asif is preparing a Profit and Loss Account. Which of the following groups should be placed on the Debit side as Indirect Expenses or Losses?
A) Salary, Rent, Postage, Carriage Outward, Discount Allowed, Office Expenses, Miscellaneous Expenses and Insurance
B) Salary, Commission Received, Rent Received, Postage and Insurance
C) Discount Received, Rent Received, Dividend Received and Salary
D) Rent, Dividend Received, Commission Received and Office Expenses
Answer: A
Q14. Mushtaq is preparing the Credit side of a Profit and Loss Account. Which of the following groups contains only Indirect Incomes/Gains shown on that side?
A) Discount Received, Rent Received, Commission Received, Interest Received and Dividend Received
B) Discount Allowed, Rent Received, Salary, Interest Received and Dividend Received
C) Commission Received, Office Expenses, Rent Received and Interest Received
D) Salary, Rent, Postage, Insurance and Dividend Received
Answer: A
Q15. Match the following items with the appropriate side of the Profit and Loss Account:
| List I | List II |
|---|---|
| A. Salary | 1. Credit Side |
| B. Discount Received | 2. Debit Side |
| C. Carriage Outward | 3. Debit Side |
| D. Dividend Received | 4. Credit Side |
| E. Insurance | 5. Debit Side |
Which of the following is correctly matched?
A) A-2, B-1, C-3, D-4, E-5
B) A-1, B-2, C-4, D-3, E-5
C) A-2, B-3, C-1, D-5, E-4
D) A-5, B-2, C-3, D-1, E-4
Answer: A
Q16. Assertion (A): Net Profit is arrived at by deducting operating as well as non-operating expenses from Gross Profit.
Reason (R): Net Profit is the ultimate profit earned after all charges and expenses.
Choose the correct answer:
A) Both A and R are true, and R is the correct explanation of A
B) Both A and R are true, but R is not the correct explanation of A
C) A is true, but R is false
D) A is false, but R is true
Answer: A
Q17. Consider the following statements regarding Net Profit and Net Loss:
- If the Credit side of the Profit and Loss Account is greater than the Debit side, the difference is called Net Profit.
- If the Debit side is greater than the Credit side, the difference is called Net Loss.
- Net Profit is added to Capital.
- Net Loss is deducted from Capital.
Which of the statements given above are correct?
A) 1 and 2 only
B) 1, 2 and 3 only
C) 2, 3 and 4 only
D) 1, 2, 3 and 4
Answer: D
Q18. Seraj is analysing the closing entries relating to Opening Stock, Purchases and Direct Expenses. Which of the following correctly represents the entry?
A) Trading A/c Dr.
To Opening Stock A/c
To Purchase A/c
To Direct Expense A/c
B) Opening Stock A/c Dr.
Purchase A/c Dr.
Direct Expense A/c Dr.
To Trading A/c
C) Profit & Loss A/c Dr.
To Opening Stock A/c
To Purchase A/c
D) Trading A/c Dr.
To Purchase Return A/c
To Opening Stock A/c
Answer: A
Q19. Which of the following correctly represents the closing entry for Purchase Return?
A) Trading A/c Dr.
To Purchase Return A/c
B) Purchase Return A/c Dr.
To Trading A/c
C) Purchase A/c Dr.
To Purchase Return A/c
D) Purchase Return A/c Dr.
To Profit & Loss A/c
Answer: B
Q20. Consider the following statements about the Profit and Loss Account:
- It is a Nominal Account prepared after the Trading Account.
- Gross Loss appears on its Debit side, while Gross Profit appears on its Credit side.
- Indirect expenses and losses are recorded on the Debit side.
- Indirect incomes and gains are recorded on the Credit side.
- Operating Profit is Gross Profit minus Operating Expenses.
- Net Profit is added to Capital, whereas Net Loss is deducted from Capital.
- Salary and Carriage Outward are examples of items on the Debit side, while Discount Received and Dividend Received are examples of items on the Credit side.
Which of the statements given above are correct?
A) 1, 2, 3 and 4 only
B) 1, 2, 3, 4 and 5 only
C) 2, 3, 4, 5, 6 and 7 only
D) 1, 2, 3, 4, 5, 6 and 7
Answer: D
