Important Questions for CBSE Class 11 Accountancy Chapter 9 – Financial Statements 1

Important Questions Class 11 Accountancy Chapter 9 Financial  Statements – 1

In Financial Accounting, post the preparation of journals, posting into ledger accounts and preparing the trial balance; the next step is the creation of the financial statements. Chapter 9 in Class 11 Accountancy deals with the basics of Financial Statements. The chapter explains the nature of financial statements, identification of various stakeholders and their information requirements, preparation of trading accounts, profit and loss accounts and the balance sheet, and understanding of the components that go into each of those accounts. As this chapter holds importance, students require a good amount of studying and practice to ace their tests and examinations. Students can practice theory and practical questions from the Important Questions Class 11 Accountancy Chapter 9 provided by Extramarks. 

Extramarks is one of the most trusted companions used by many students across the country. At Extramarks, we provide students with a list of Important Questions Class 11 Accountancy Chapter 9 with solutions keeping in mind the CBSE syllabus. Our experts refer to NCERT books, reference books, CBSE past years’ question papers, CBSE sample papers, etc., to create a comprehensive list of questions that can help the students score good grades in the examination.

Apart from the Important Questions Class 11 Accountancy Chapter 9, students can easily access various resources such as NCERT books, NCERT solutions, reference books, CBSE important questions, etc., which can help them feel confident to face the questions in their examinations. 

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Important Questions of Financial Statements Class 11 with Solutions

Chapter 9 in Class 11 Accountancy contains a mix of theory and practical questions. After understanding the concepts, practising the numerical questions is imperative to understand the theoretical concepts better.  

Some of the Important Questions Class 11 Accountancy Chapter 9 are mentioned below:

Question 1. Gross profit or loss is transferred to …………….. Account.

Answer 1. Profit & loss account

Question 2. A balance sheet is a ………………

Answer 2: Statement 

Question 3. State True or False:

1. Closing stock is not shown in the balance sheet.
2. A bad debt reserve is a loss.
3. Capital is a fixed Liability.

Answer 3: 

1. False.
2. False.
3. True.

Question 4. Explain the concept of Cost of Goods Sold.

Answer 4: The Cost of Goods Sold or COGS is the cost that goes into producing goods sold to the customers. The COGS includes the cost of raw materials, direct expenses, and value of opening stock (value of last year’s unsold stock) and excludes the value of the closing stock( current years’ unsold stock).

The formula for calculation of COGS is as follows:

COGS = Opening stock + Purchases + Direct expenses − Closing stock

Question 5. Describe Earnings before interest and tax (EBIT).

Answer 5: EBIT or earnings before interest and taxes is also known as operating profit. The difference between operating revenue and operating expenses gives us the operating profit or profit that is generated from normal business operations.

While calculating EBIT, transactions of a purely financial nature are not considered, and abnormal losses like loss by fire, theft, etc., are also not recorded.

The formula for calculating EBIT is as follows:

EBIT/ Operating Profit = Net Profit+ Non-Operating Expenses – Non-Operating Incomes

Or,

EBIT = Gross Profit – Operating Expenses

Question 6. What are financial statements? What information do they provide?

Answer 6: Financial statements are documents that provide business-related financial data and can fulfil the information needs of both internal and external users. It serves as a resource for financial information that satisfies the various information needs of users. It has been prepared to offer a truthful and fair image of the business. To do this, it is necessary to create three statements: a trading account, a profit and loss account, and a balance sheet.

The financial statements give information in the form of the book value of the assets and their liabilities, gross profit or gross loss, net profit or net loss, and profit or loss.

Each user of accounting information has a different perspective on the importance and usefulness of financial statement data.

The users of financial information are as follows:

1. Internal: People directly connected to the business are considered internal users. Owners, management, personnel, workers, etc., are a few examples.

1. Owners: Owners require information about the profit or loss of a particular accounting period. This is provided to them with the help of financial statements, which help them see the net profits or losses and a detailed view of the operating profits/losses.
2. Management: The management is concerned with making decisions about the organization’s future, making plans and policies, etc. Thus financial statements help them take actions that will be profitable for the organization in the future.
3. Employees and Workers: The employees and workers expect some returns as a bonus. This expectation is directly related to the net profit/losses declared by the company at the end of the year.

2. External: The people and organizations not directly involved with the company are considered external users. Government, tax agencies, investors, etc., are a few examples.

1. Government: To determine numerous macroeconomic indicators, such as national income, GDP, employment opportunities generated, etc., the government relies on the information from the financial statements.
2. Tax Authorities: The tax department is interested in the business’s sales, output, turnovers, exports, and imports. The financial statements information is the foundation for estimating the business’s tax liabilities.
3. Investors: Financial statements help understand a company’s earning potential, the potential for expansion, and financial standing. With the use of this information, investors may evaluate their investments and decide if they will be profitable or not.
4. Banks and other financial institutions: Banks and other financial institutions can learn from financial statements whether a company is creditworthy, solvent, and capable of making payments.
5. Creditors: Financial statements notify creditors about the company’s reputation, creditworthiness, and ability to pay back debts.

Question 7. Differentiate between Capital Expenditure and Revenue Expenditure.

Answer 7: 

Question 8. The following balances were extracted from the books of M/s Ahuja and Nanda. Calculate the amount of:

(a) Cost of goods available for sale during the year

(b) Cost of goods sold during the year

(c) Gross Profit

Opening stock of 25,000

Credit purchases of 7,50,000

Cash purchases of 3,00,000

Credit sales of 12,00,000

Cash sales 4,00,000

Wages 1,00,000

Salaries 1,40,000

Closing stock 30,000

Sales return 50,000

Purchases return 10,000

Answer 8:

1. a) Cost of Goods Sold Available for Sales

Or

Cost of Goods Manufactured = Opening stock + Net purchases + Wages

= 25,000 + 10, 40,000 + 1, 00,000

= ₹ 11, 65,000

(b) Cost of Goods Sold = Opening stock + Net purchases + Wages – Closing stock

= 25,000 + 10, 40,000 + 1, 00,000 – 30,000

= ₹ 11, 35,000

Or

Cost of Goods Sold = Net Sales – Gross Profit

= 15, 50,000 – 4, 15,000

= ₹ 11, 35,000

(c) Trading Account

Question 9. Prepare trading and profit and loss account and balance sheet from the following particulars as of March 31, 2017.

Closing stock ₹ 30,000.

Answer 9: 

The Trading Account is as follows:-

The Profit and Loss Account is below:- 

The Balance Sheet is as follows:- 

Question 10. Prepare trading and profit and loss account and balance sheet, as of March 31, 2017:

Closing stock, as of March 31 2017, ₹ 22,400

Answer 10: 

The Trading Account is as follows:-

The Profit and Loss Account is below:-

The Balance Sheet is as follows:- 

Benefits of Solving Financial Statements Class 11 Questions

Financial Statements 1 might appear a little daunting at first, but with proper practice, students can ace any question from this chapter. Students who have a stronghold over making the final accounts and posting the correct items will find the coming chapters easy. Practice from NCERT books, reference books, and Important Questions Class 11 Accountancy Chapter 9 can help students understand concepts and achieve the desired grades in the examinations.

Here are some expected benefits of solving Class 11 Accountancy Chapter 9 Important Questions:

• Students will benefit from practicing Important Questions Class 11 Accountancy Chapter 9 as they are similar to exam questions which will help them to do well in their exams and obtain high grades.
• These will help the students to learn how to compose an answer that meets the question’s requirements and thereby hits the target.
• Questions are included in the list of important questions, strictly keeping in mind the CBSE guidelines and syllabus.
• The Chapter 9 Class 11 Accountancy Important Questions with solutions are prepared by subject experts in a step-by-step design that will help students understand concepts in a better way and practice sincerely for their examinations.

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