Accounting Review

The financial statement and the balance sheet together form the

• calculation of profit or loss

• foundation of the company's financial position

• assessment of a company's financial performance

• foundation of the company's financial statements

Answer explanation

The income statement and the statement of financial position together make up the foundation of the business’ financial statements.

Sales Revenue – Cost of Sales

• Drawings

• Gross Profit

• Expenses

• Profit for the year

Answer explanation

The correct choice is Gross Profit because Sales Revenue minus Cost of Sales equals Gross Profit, which represents the profit before deducting expenses.

A business provides the following information.

Calculate the cost of sales.

Revenue $10000

Purchases $80000

Opening Inventory $1000

Closing Inventory $1500

• Sales Returns $200

• Purchases Returns $300

Answer explanation

Cost of Sales = Opening Inventory + Purchases - Closing Inventory = $1000 + $80000 - $1500 = $78500

Benjamin borrowed money from Mia and promised to repay it within a month. In this scenario, debt is ...................

• Drawings Account

• Purchase Account

Answer explanation

Debt is represented in the Drawings Account, not the Purchase Account. Therefore, the correct choice is Drawings Account.

Scarlett is trying to decide between using her Credit Card or her Debit Card for a purchase. Which account should she use?

• Credit Card

• Debit Card

Answer explanation

Credit is recorded in the Purchase Account, not the Drawings Account. Therefore, the correct choice is Purchase Account.

Profit for the year = ???

• Gross Profit + Income – Expenses

• Gross Profit - Income – Expenses

• Gross Profit + Income + Expenses

• Gross Profit - Income + Expenses

Answer explanation

To calculate the profit for the year, you need to add the Gross Profit and Income, then subtract the total Expenses. Therefore, the correct formula is Gross Profit + Income - Expenses.

A trader provided the following information for the year ended 31 August 2016.

Sales $80000

Cost of Sales $50000

Profit for the year $14000

What were the expenses for the year ended 31 August 2016?

Answer explanation

Expenses can be calculated using the formula: Expenses = Sales - Profit = $80000 - $14000 = $66000

Closing capital = opening capital - profit – drawings

• True

• False

Answer explanation

The statement is false because the correct formula for closing capital is: Closing capital = opening capital + profit - drawings.

In a bakery, the menu board displays the types of bread available. How many parts is the income statement of a sole trader comprised of?

• five

• three

• four

• two

Answer explanation

The income statement of a sole trader is comprised of two parts, making the correct answer choice 'two'.

Find the Gross Profit.

Income - $ 200

Expanses - $ 1,500

Profit for the year/loss - 3,000 profit for the year.

Answer explanation

Gross Profit = Income - Expenses Gross Profit = $200 - $1,500 Gross Profit = -$1,300 Since the profit for the year is $3,000, the Gross Profit is $3,000.