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. 

Access CBSE Class 11 Accountancy Important Questions and Answers

Class 11 Accountancy Chapter-wise important questions are available for free to students, and these questions are perfect for self-study.

Sign up and get complete access to CBSE Class 11 Accountancy Important Questions for other chapters too:

CBSE Class 11 Accountancy Important Questions
Sr No. Chapters Chapters Name
1 Chapter 1 Introduction to Accounting
2 Chapter 2 Theory Base of Accounting
3 Chapter 3 Recording of Transactions – 1
4 Chapter 4 Recording of Transactions II (Financial Accounting – I)
5 Chapter 5 Bank Reconciliation Statement
6 Chapter 6 Trial Balance and Rectification of Errors
7 Chapter 7 Depreciation, Provisions & Reserves
8 Chapter 8 Bill of Exchange
9 Chapter 9 Financial Statements – 1
10 Chapter 10 Financial Statements 2
11 Chapter 11 Accounts from Incomplete Records
12 Chapter 12 Applications of Computers in Accounting
13 Chapter 13 Computerised Accounting System

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.
  1. 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: 

Basis of Difference Capital Expenditure Revenue Expenditure
Meaning An expense incurred to acquire or enhance an asset. Costs incurred for carrying out routine company operations.
Term Long-term in nature. Short-term in nature.
Benefits The advantages are attained over numerous accounting periods. The benefits are only available for the current calendar year.
Nature Non-recurring Recurring
Shown in It is shown in Income Statement and Balance Sheet It is shown in the Income statement

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

Trading Account
Dr. Cr.
Particulars  Amount

₹

 Particulars Amount

₹
Opening Stock 25,000 Sales
Purchases Add: Credit Sales 12,00,000
Add: Credit Purchases 7,50,000 Add: Cash Sales 4,00,000
Add: Cash Purchases 3,00,000 16,00,000
10,50,000 Less: Sales Return (50,000) 15,50,000
Less: Purchases Return (10,000) 10,40,000
Wages 1,00,000 Closing Stock 30,000
Gross Profit 4,15,000
15,80,000 15,80,000

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

Account Title Debit Amount ₹ Credit Amount ₹
Purchases and Sales 3,52,000 5,60,000
Return inwards and Return outwards 9,600 12,000
Carriage inwards 7,000  
Carriage outwards 3,360  
Fuel and power 24,800  
Opening stock 57,600  
Bad debts 9,950  
Debtors and Creditors 1,31,200 48,000
Capital   3,48,000
Investment 32,000  
Interest on investment   3,200
Loan   16,000
Repairs 2,400  
General expenses 17,000  
Wages and salaries 28,800  
Land and buildings 2,88,000  
Cash in hand 32,000  
Miscellaneous receipts   160
Sales tax collected   8,350

Closing stock ₹ 30,000.

Answer 9: 

The Trading Account is as follows:-

Trading Account as of March 31, 2017
Dr. Cr.
Particulars Amount

₹

 Particulars Amount

₹
Opening Stock 57,600 Sales 5,60,000
Purchases 3,52,000 Less: Return Inwards (9,600) 5,50,400
Less: Return Outwards (12,000) 3,40,000 Closing Stock 30,000
Carriage Inwards 7,000
Fuel and Power 24,800
Wages and Salaries 28,800
Profit and Loss (Gross Profit) 1,22,200
5,80,400 5,80,400

The Profit and Loss Account is below:- 

Profit and Loss Account as of March 31, 2017
Dr. Cr.
Particulars Amount

₹

 Particulars Amount

₹
Carriage Outwards 3,360 Trading (Gross Profit) 1,22,200
Bad Debts 9,950 Interest on Investment 3,200
Repairs 2,400 Miscellaneous Receipts 160
General Expenses 17,000
Net Profit 92,850
1,25,560 1,25,560

The Balance Sheet is as follows:- 

Balance Sheet as of March 31,2017
Liabilities Amount

₹

 Assets Amount

₹
Capital 3,48,000 Land and Building 2,88,000
Add: Net Profit 92,850 4,40,850 Investment 32,000
Debtors 1,31,200
Loan 16,000 Closing Stock 30,000
Creditors 48,000 Cash in Hand 32,000
Sales Tax Collected 8,350
5,13,200 5,13,200

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

Account Title Amount

₹

 Account Title Amount

₹
Machinery 27,000 Capital 60,000
Sundry debtors 21,600 Bills payable 2,800
Drawings 2,700 Sundry creditors 1,400
Purchases 58,500 Sales 73,500
Wages 15,000    
Sundry expenses 600    
Rent and taxes 1,350    
Carriage inwards 450    
Bank 4,500    
Openings stock 6,000    

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

Answer 10: 

The Trading Account is as follows:-

Trading Account as of March 31, 2017
Dr. Cr.
Particulars Amount

₹

 Particulars Amount

₹
Opening Stock 6,000 Sales 73,500
Purchases 58,500 Closing Stock 22,400
Wages 15,000
Carriage Inwards 450
Profit and Loss (Gross Profit) 15,950
95,900 95,900

The Profit and Loss Account is below:-

Profit and Loss Account as of March 31, 2017
Dr. Cr.
Particulars Amount

₹

 Particulars Amount

₹
Sundry Expenses 600 Trading (Gross Profit) 15,950
Rent and Taxes 1,350
Net Profit 14,000
15,950 15,950

The Balance Sheet is as follows:- 

Balance Sheet as on March 31, 2017
Liabilities Amount

₹

 Assets Amount

₹
Capital 60,000 Fixed Assets 
Add: Net Profit 14,000 Machinery 27,000
74,000
Less: Drawings 2,700 71,300 Current Assets 
Bank 4,500
Sundry Creditors 1,400 Closing Stock 22,400
Bills Payable 2,800 Sundry Debtors 21,600
75,500 75,500

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.

Students in classes 1 to 12 can find comprehensive educational resources with Extramarks. Our website has many other study materials besides Important Questions Class 11 Accountancy Chapter 9. Students can view these resources by clicking on the links provided below:

Q.1

Sales during the year 2,00,000
Purchases 1,60,000
Other Direct expenses 10,000
Opening stock 20,000
Lighting 5,000
Gross loss 25,000

Find out the value of stock at the end of the year.

Marks:1

A. 30,000

B. 25,000

C. 40,000

D. 60,000

Ans

30,000

Q.2 Opening Stock 15,000, Sales 48,000, Carriage Inward 3,000, Sales Return 3,000, Gross Profit 18,000, Purchases 30,000, Purchases Returns 2,700. Calculate Closing Stock and the Cost of Goods Sold.

Marks:3
Ans

Net Sales = Sales Sales Return

= 48,000 3,000 = 45,000

Cost of Goods Sold = Net Sales – Gross Profit

= 45,000 18,000

= 27,000

Cost of Goods Sold = Opening Stock + Purchases Purchases Return + Carriage Inward – Closing Stock

Or Closing Stock = Opening Stock + Purchases Purchases Return + Carriage Inward Cost of Goods Sold

= 15,000 + 30,000 2,700 + 3,000 27,000

Closing Stock = 18,300

Q.3 Preparing a Trading Account for the year ending March 31, 2021 From the following balances as at March 31,2021:

Stock 10,000
Purchases 1,00,000
Wages 5,000
Carriage Inwards 1,000
Sales (inclusive of GST) 1,70,000
Return Inwards 5,000
Returns Outward 8,000
GST Included in Sales 15,000
Freight 500
Direct Expenses 2,500

Closing Stock as on March 31,2021 was valued at 20,000

Marks:4
Ans

TRADING ACCOUNT

For year ending March 31,2021
Particulars Particulars
To Opening Stock 10,000 By Sales 1,70,000
To Purchase 1,00,000 Less GST 15,000
Less Return 8,000 92,000 1,55,000
To wages 5,000 Less: Return 5,000 1,50,000
To Carriage Inward 1,000 By Closing Stock 20,000
To Freight 500
To Direct Expenses 2,500
To Profit and Loss A/c 59,000
1,70,000 1,70,000

Q.4 From the following Trial Balance of Sky Garments as at 31st March, 2021, prepare a Balance Sheet and pass the required journal entries:-

Trial Balance (Relevant portion only)
Dr. () Cr.()
Debtors and Creditors 54,200 26,000
Input CGST 8,000
Input SGST 8,000
Input IGST 18,000
Output CGST 10,400
Output SGST 10,400
Output IGST 12,000

Goods worth 10,000 plus IGST @18% were sold and dispatched on 28th March, 2021, but no entry was passed to this effect.

Goods costing 14,000 plus IGST @18% were purchased and included into stock but no entry was passed to record the purchases. Show your workings clearly.

Marks:8
Ans

BALANCE SHEET as at 31st March, 2021 (Relevant portion only)
Liabilities Assets
Creditors 26,000 Debtors 54,200
Add: Purchases and Input IGST 16,520 42,520 Add: Sales and Output IGST 11,800 66,000
Input IGST 1,920
Income Tax and Advance payment of Income Tax are drawings.
(i) Entry for Sales Omitted: L.F. Dr. Cr.
Debtors A/c Dr. 11,800
To Sales A/c 10,000
To Output IGST A/c 1,800
(ii) Entry for Purchases Omitted:
Purchases A/c Dr. 14,000
Input IGST A/c Dr. 2,520
To Creditors A/c 16,520
(iii) Adjustment of GST:
First of all, the adjustment will be made for IGST:
Input IGST : 18,000 + 2,520 20,520
Less: Output IGST: 12,000 + 1,800 13,800
Excess Input IGST 6,720
(This excess of 6,720 will be first used to set off CGST and then to SGST)
Less: Excess of Output CGST (10,400-8,000) 2,400
4,320
Less: Excess of Output SGST (10,400 – 8,000) 2,400
Balance of Input IGST is shown on the Assets side 1,920

Q.5 Briefly explain the importance of Financial Statements.

Marks:6
Ans

Importance of Financial Statements:

a) Trading and profit and Loss Account:

Determine Gross Profit or Gross Loss : Trading account is prepared to to know gross profit earned or gross loss incurred by the business during the accounting period.

Determine Net Profit or Net Loss : Profit and Loss Account shows net profit earned or net loss incurred by the business during an accounting period.

Comparison with the Previous Year’s Profits: Gross profit and Net profit for the accounting period can be compared with that of the previous years profits.

Details of Expenses and Income : Trading and profit and Loss Account provide details of all expenses and income of the business. It helps to determine how expenses can be controlled and sources of income can be increased.

Reserves :Reserves are created out of profits to meet future uncertainties and to strengthen financial position of the firm.

Ratios : For financial analysis, ratios are calculated with the help of Trading and Profit and Loss Account.

b) Balance Sheet

Ascertaining Financial Position: Balance Sheet shows the financial position of the business on a particular date by reflecting accurate value of assets and liabilities.

Comparison with Previous Year : The amounts under various heads of Balance Sheet can be compared with that of previous year to assess the change in financial position.

Determining Solvency Position: With the help of Balance Sheet, the short-term solvence position of the business by computing Current ratio and Liquid Ratio.

Q.6 What do you mean by Grouping and Marshelling

Marks:3
AnsThe assets and liabilities should be shown in certain order in the Balance Sheet. Therefore, they should be arranged in certain groups and in particular order. This is called ‘Grouping’ and ‘Marshelling’ of the Balance Sheet.

Grouping:- Means putting items of a similar nature under a common heading.

Marshelling:- Means the arrangement of assets and liabilities in a particular order in the Balance Sheet

Please register to view this section

CBSE Class 11 Accountancy Important Questions

Chapter 1 - Introduction to Accounting

Chapter 2 - Theory Base of Accounting

Chapter 3 - Recording of Transactions – 1

Chapter 4 - Recording of Transactions II (Financial Accounting – I)

Chapter 5 - Bank Reconciliation Statement

Chapter 6 - Trial Balance and Rectification of Errors

Chapter 7 - Depreciation, Provisions & Reserves

Chapter 8 - Bill of Exchange

Chapter 10 - Financial Statements 2

Chapter 11 - Accounts from Incomplete Records

Chapter 12 - Applications of Computers in Accounting

Chapter 13 - Computerised Accounting System