Financial Statements - 1

What is the purpose of an income statement?

• To show the company’s assets and liabilities

• To calculate the owner’s equity in the business

• To determine the financial position on a specific date

• To calculate profit or loss over a period

Which of the following best represents the formula for calculating Gross Profit?

• Revenue - Expenses

• Revenue - Purchases

• Revenue - Cost of Goods Sold (COGS)

• Revenue - Net Profit

The cost of goods sold (COGS) is calculated by which formula?

• Opening Inventory + Purchases - Closing Inventory

• Purchases + Closing Inventory - Opening Inventory

• Opening Inventory + Purchases + Closing Inventory

• Closing Inventory - Purchases

If a business had $50,000 in revenue and $30,000 in cost of goods sold, what would the gross profit be?

• $20,000

• $80,000

• $30,000

• $50,000

Net Profit is calculated by subtracting __________ from Gross Profit.

• Cost of Goods Sold

• Inventory

• Total Expenses

• Sales

A business has $10,000 in opening inventory, $15,000 in purchases, and $8,000 in closing inventory. What is the cost of goods sold?

• $13,000

• $17,000

• $5,000

• $23,000

If a business has sales revenue of $100,000, cost of goods sold of $60,000, and office expenses of $20,000, what is the net profit?

• $20,000

• $40,000

• $60,000

• $80,000

Which of the following items would not appear on an income statement?

• Rent Expense

• Trade Payable

• Sales Revenue

• Cost of Goods Sold

Which of the following best describes gross profit?

• Total revenue minus cost of goods sold

• Total revenue minus operating expenses

• Total revenue minus liabilities

• Total expenses minus operating profit

Which of the following items will not appear on the income statement of a service business?

• Revenue

• Expenses

• Net Profit

• Cost of goods sold