Understanding Comprehensive Income Statements

What is the primary purpose of a Statement of Comprehensive Income?

• To calculate the company's tax liability

• To provide a summary of a company's financial performance over a specific period

• To list all assets and liabilities of a company

• To track cash flow movements

Which of the following is included in the calculation of gross profit?

• Depreciation

• Revenue

• Accruals

• Prepayments

How is the cost of goods sold (COGS) calculated?

• Revenue - Expenses

• Opening inventories + Purchases - Closing inventories

• Total assets - Total liabilities

• Gross profit - Operating expenses

Which method of depreciation results in a constant expense each year?

• Reducing balance method

• Straight-line method

• Double declining balance method

• Units of production method

What is the effect of an accrual on the Statement of Comprehensive Income?

• It increases revenue

• It decreases expenses

• It increases expenses

• It has no effect

Which of the following is an example of other income?

• Sales revenue

• Interest received

• Cost of goods sold

• Depreciation

What adjustment is made for prepayments in the Statement of Comprehensive Income?

• They are added to expenses

• They are subtracted from expenses

• They are added to revenue

• They are subtracted from revenue

How is profit for the year calculated?

• Gross profit - Operating expenses + Other income

• Revenue - Cost of goods sold

• Total assets - Total liabilities

• Opening inventories + Purchases - Closing inventories

Which of the following is a characteristic of the reducing balance method of depreciation?

• It results in a constant depreciation expense each year

• It results in a decreasing depreciation expense over time

• It results in an increasing depreciation expense over time

• It does not account for asset usage

What is the purpose of analysing a Statement of Comprehensive Income?

• To determine the company's cash flow

• To assess the company's profitability and financial performance

• To calculate the company's tax liability

• To list all assets and liabilities