Understanding Income Statements Quiz

What does an income statement show?

• The assets and liabilities of a business

• The revenues and expenses of a business over a period of time

• The cash inflows and outflows of a business

• The equity changes of a business

Which of the following is an example of revenue on an income statement?

• Rent expense

• Salaries payable

• Sales income

• Accounts receivable

What is the formula for calculating Gross Profit?

Which of the following items is classified as an operating expense on an income statement?

• Sales revenue

• Interest income

• Advertising expense

• Capital investment

What is Net Income?

• Total revenue minus total liabilities

• Total assets minus total expenses

• Total revenue minus total expenses

• Total equity minus total revenue

• The claim is correct because administrative expenses are not part of the income statement

• The student is correct because interest income is not included in the income statement

Which of the following best describes the term "Cost of Goods Sold" on an income statement?

• The total amount of goods purchased during the period

• The direct cost of producing or purchasing the goods that were sold during the period

• The total expenses incurred in running the business

• The closing inventory value at the end of the period