Font size
WorksheetsTHE PROFIT AND LOSS ACCOUNT.
Total questions: 20
Worksheet time: 20mins
.................................. refers to the final section of a Profit and loss account and shows how the net profit after interest and tax is distributed, i.e.dividends to shareholders and/or retained profit kept by the business.
A balance sheet
The appropriation account
Cost of goods sold
Retained profit
The profit and loss account shows the trading position of a business at the end of a specified accounting period.
YES
NO
The balance sheet shows the assets and liabilities of a business at a particular point in time.
YES
NO
Is there a universal method to
present the final accounts?
YES
NO
Internal stakeholders can use final accounts to manage the business and to aid strategic decision-making.
YES
NO
The profit and loss account (or the income statement) is a financial statement of a firm's trading activities over a period of time, usually one month.
TRUE
FALSE
Revenue is the positive difference between a firm's revenues and its costs.
TRUE
FALSE
............................is the inflow of money
from ordinary trading activities, e.g. cash sales, credit sales, charges/fees and royalties .
Revenue
Costs
...........................are the outflow
of money from a business due to its operations, e.g. wages, salaries, rent and the purchase of stock.
profit
costs
There are three sections to an income statement: the trading account, the profit and loss account, and the appropriation
account.
True
False
The trading account is the first section of the P&L account and shows the difference between a firm's sales revenue (the value
of products sold to customers) and its costs of producing or purchasing those products to sell. Hence, the trading account
shows the gross profit of a firm.
no
yes
.....................= Sales revenue - Cost of goods
Gross Profit
Revenue
The cost of goods sold (COGS) is the accountant's term for the direct costs of thegoods thatareactually sold, e.g. raw material costs
TRUE
FALSE
COGS (or cost of sales when referring to services) is workedout by the formula:
= Opening stock + Purchases - Closing stock
= Sales revenue - Cost of goods sold
= Gross profit - Expenses
Net profit formula is:
=COGS = Opening stock + Purchases - Closing stock
=Gross profit - Expenses
Net profit is the surplus, if any, from sales revenues after all expenses are accounted for.
false
true
Retained profit This shows how much of the net profit after interest and tax is kept by the business for its own use, such as reinvesting it in the company or to expand the business.
TRUE
FALSE
Dividends This shows the amount of net profit after interest and tax that is distributed to the owners (shareholders) of the company.
true
false
The P&L account shows the historical performance of a business. There is no guarantee that future performance is
linked to past performance or success.
LIMITATION OF P & L ACCOUNTS.
BENEFIT OF P&L ACCOUNTS.
The gross profitmightseem appealing, but if the expensesare higher than the gross profit, the business makes an overall loss. Clearly, a business cannot survive for long without making any actual profit.
TRUE
FALSE
