IGCSE and AS Level Accounting - Sole Trader Financial Statements

What is the purpose of the Income Statement?

• To list all liabilities and assets

• To calculate the net profit or loss

• To report the cash inflows and outflows

• To show the financial position of a business

Which of the following is classified as revenue?

• Purchase of machinery

• Sales of goods

• Drawings by the owner

• Loan taken from the bank

Which item is included in the cost of sales calculation?

• Sales revenue

• Opening inventory

• Administrative expenses

• Interest on loan

Gross profit is calculated by:

• Sales - Cost of Sales

• Sales - Expenses

• Total Income - Total Expenses

• Operating Profit - Tax

5. A business has sales revenue of $150,000, opening inventory of $20,000, purchases of $90,000, and closing inventory of $15,000. What is the cost of sales?

• 5. $105,000

• 5. $95,000

• 5. $110,000

• 5. $75,000

Answer explanation

5. Cost of Sales = Opening Inventory + Purchases - Closing Inventory = $20,000 + $90,000 - $15,000 = $95,000

If the gross profit is $55,000 and operating expenses are $35,000, what is the net profit?

• $90,000

• $20,000

• $55,000

• $35,000

Answer explanation

(Net Profit = Gross Profit - Operating Expenses = $55,000 - $35,000 = $20,000)

Which of the following is NOT an expense?

• Rent paid

• Wages

• Depreciation

• Bank loan repayment

Answer explanation

Paying back a liability is a commitment, NOT an expense.

A business has sales of $120,000, cost of sales of $80,000, and expenses of $25,000. What is the net profit?

• $15,000

• $45,000

• $40,000

• $20,000

Answer explanation

Net Profit = Sales - Cost of Sales - Expenses = $120,000 - $80,000 - $25,000 = $15,000

Which of the following items is added to the gross profit to calculate the operating profit?

• Discount allowed

• Discount received

• Depreciation

• Wages

Answer explanation

Discount received is other INCOME which added up to profit.

If a business has sales of $200,000, purchases of $120,000, opening inventory of $30,000, and closing inventory of $40,000, what is the gross profit?

• $70,000

• $90,000

• $80,000

• $60,000

Answer explanation

Gross Profit = Sales - Cost of Sales = $200,000 - ($30,000 + $120,000 - $40,000) = $90,000