The 'Gross Profit' is transferred to: MCQ with Answer and Explanation

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The 'Gross Profit' is transferred to:

A. Capital Account

B. Profit and Loss Account credit

C. Balance Sheet liability

D. Trading Account debit

Answer: Option B

Solution (By JKSSB Mock Tests)

Gross profit is credited to Profit & Loss Account.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

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The 'Proprietary Ratio' establishes relationship between:

A. Sales and debtors

B. Current assets and current liabilities

C. Proprietors' funds and total assets

D. Debt and equity

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Correct Answer: Option C

Explanation:
Proprietary ratio = Shareholders' funds / Total assets, indicating the proportion of assets financed by owners.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #2

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A tax levied on a commodity at each stage of production and distribution, based only on the value added at that stage, is characteristic of:

A. Wealth Tax

B. Income Tax

C. Value Added Tax (VAT) / GST

D. Corporate Tax

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Correct Answer: Option C

Explanation:
VAT/GST eliminates the cascading effect by taxing only the value added, utilizing the Input Tax Credit mechanism.

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Question #3

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A and B share profits 3:2. They admit C with 1/5th share. C brings ₹30,000 as capital and ₹10,000 as goodwill. The total goodwill of the firm is:

A. ₹50,000

B. Cannot determine

C. ₹2,00,000

D. ₹10,000

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Correct Answer: Option A

Explanation:
C's share of goodwill = 1/5 = ₹10,000. So total goodwill = 10,000 × 5/1 = ₹50,000.

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