Business 3.4 Knowledge Quiz - Profit and Loss Account

What is the purpose of the profit and loss account?

• To analyze the customer satisfaction levels

• To determine the market share of a company

• To calculate the total assets of a business

• To show a firm's profit or loss after all production costs have been subtracted from the organization's revenues

What is another name for the profit and loss account?

• Statement of profit or loss

• Balance sheet

• Cash flow statement

• Income statement

What is the formula for calculating Gross profit?

• Sales revenue - Cost of sales

• Cost of sales - Sales revenue

• Sales revenue + Cost of sales

• Sales revenue / Cost of sales

What are included in the Expenses section of the profit and loss account?

• Indirect costs of production

• Direct costs of production

• Interest and tax

• Dividends

What does the Profit before interest and tax section of the P&L account show?

• Value of a firm's profit before deducting interest payments on loans and taxes on corporate profits

• Value of sales revenue

• Value of dividends paid to shareholders

• Value of retained profit

What does the Tax section of the P&L account refer to?

• Compulsory deductions paid to the government as a proportion of a firm's profits

• Marketing expenses

• Cost of goods sold

• Payments made to suppliers

What are Dividends in the context of the profit and loss account?

• Tax deductions

• Payments from a company's profit paid to the shareholders

• Cost of sales

• Interest payments

What is Retained profit and why is it important for businesses?

• Tax deductions

• Interest payments

• Payments made to suppliers

• Funds left over from profits that are kept within the business for its own use

Where is Retained profit recorded in the financial statements?

• In the cash flow statement

• Only in the profit and loss account

• Only in the balance sheet

• Both in the balance sheet and profit and loss account

What is the term used for the profit and loss account of non-profit organizations?

• Surplus

• Interest

• Profit

• Dividends