51
Which section of the income statement reports the company’s core business earnings?
A.
B.
C.
D.
Answer & Solution
Operating income measures the profit from a company's core business operations.
52
If an income statement shows a negative net income, it is called:
A.
B.
C.
D.
Answer & Solution
A net loss occurs when total expenses exceed total revenues.
53
Which of the following reduces net income?
A.
B.
C.
D.
Answer & Solution
A higher cost of goods sold (COGS) lowers gross profit, reducing net income.
54
Which financial statement is prepared first?
A.
B.
C.
D.
Answer & Solution
The income statement is prepared first because net income or loss is needed to complete the other financial statements.
55
Dividends appear in which financial statement?
A.
B.
C.
D.
Answer & Solution
Dividends are distributions of profit and are recorded in the statement of retained earnings, not the income statement.
56
The Statement of Affairs is used to determine:
A.
B.
C.
D.
Answer & Solution
A Statement of Affairs is similar to a Balance Sheet and is used to determine the financial position, particularly in single-entry bookkeeping.
57
The Statement of Affairs is mainly prepared in which accounting system?
A.
B.
C.
D.
Answer & Solution
The Statement of Affairs is used in a single-entry system because it helps in estimating the capital by comparing assets and liabilities.
58
What is the formula used in the Statement of Affairs to determine capital?
A.
B.
C.
D.
Answer & Solution
The capital is calculated as Assets – Liabilities, which is the net worth of the business.
59
A Statement of Affairs is similar to which financial statement?
A.
B.
C.
D.
Answer & Solution
The Statement of Affairs is similar to the Balance Sheet as it shows assets, liabilities, and capital.
60
If opening capital is $50,000, closing capital is $60,000, and additional capital introduced is $5,000, what is the profit or loss?
A.
B.
C.
D.
Answer & Solution
Profit = Closing Capital +
Drawings – (Opening Capital + Additional Capital)
Profit = $60,000 – ($50,000 + $5,000) = $5,000
