Cards (59)

  • An income statement reports the financial performance of a business over a specific period of time
  • Match the component of an income statement with its description:
    Revenue ↔️ Total money from sales
    Expenses ↔️ Costs incurred in generating revenue
    Profit/Loss ↔️ Overall financial performance
  • The main revenue sources for a sole trader's business include sales of goods, sales of services, commission income, and rental income
  • An income statement shows the assets and liabilities of a business.
    False
  • Steps for preparing an income statement
    1️⃣ Record revenue transactions
    2️⃣ Record expense transactions
    3️⃣ Categorize expenses as direct or indirect
    4️⃣ Calculate gross profit
    5️⃣ Calculate net profit
  • Gross profit is calculated using the formula: Revenue - Direct Expenses
  • What is the formula to calculate gross profit?
    Gross Profit = Revenue - Direct Expenses
  • Why is calculating gross profit important in preparing an income statement?
    Provides insight into core profitability
  • What is the purpose of an income statement?
    Report financial performance
  • Match the revenue source with its description:
    Sales of goods ↔️ Revenue from selling physical products
    Sales of services ↔️ Revenue from providing professional services
    Commission income ↔️ Revenue earned for facilitating transactions
    Rental income ↔️ Revenue from leasing property or equipment
  • What are examples of direct expenses?
    Cost of materials, direct labor
  • Gross profit is the profit made after accounting for all expenses.
    False
  • Net profit is calculated after deducting all expenses from gross profit.

    True
  • The income statement reports the financial performance of a business over a specific period of time.
  • An income statement typically covers a period of one
  • Match the income statement component with its description:
    Revenue ↔️ Money from selling goods or services
    Expenses ↔️ Costs incurred in generating revenue
    Profit/Loss ↔️ Overall financial performance
  • Revenue from providing professional or consulting services is classified as sales
  • What is the formula for gross profit?
    Revenue - Direct Expenses
  • Arrange the following items in the order they would appear in an income statement:
    1️⃣ Revenue
    2️⃣ Direct Expenses
    3️⃣ Gross Profit
    4️⃣ Indirect Expenses
    5️⃣ Net Profit
  • Gross profit is the difference between revenue and direct expenses
  • Why is an income statement considered crucial for a business?
    Reports financial performance
  • The main revenue sources for a sole trader's business include sales of goods, sales of services, commission income, and rental
  • What is the formula for calculating gross profit?
    RevenueDirect Expenses\text{Revenue} - \text{Direct Expenses}
  • Net profit represents the true profitability of a business.

    True
  • Expenses can be categorized as either direct expenses or indirect expenses.
  • What is an example of a direct expense for a sole trader's business?
    Cost of materials
  • What is the formula for calculating net profit?
    Gross ProfitIndirect Expenses\text{Gross Profit} - \text{Indirect Expenses}
  • Gross profit is the difference between revenue and direct expenses.
  • Match the expense category with its description:
    Direct Expenses ↔️ Costs directly related to producing goods or services
    Indirect Expenses ↔️ Costs supporting overall business operations
  • What is the purpose of an income statement?
    Report financial performance
  • An income statement typically covers a year-long period.

    True
  • Why is an income statement crucial for a sole trader?
    Provides insight into profitability
  • Match the revenue source with its description:
    Sales of goods ↔️ Revenue from physical products
    Sales of services ↔️ Revenue from professional services
    Commission income ↔️ Revenue for facilitating transactions
    Rental income ↔️ Revenue from leasing property
  • The profit or loss in an income statement is the difference between revenue and expenses
  • What is gross profit?
    Revenue minus direct expenses
  • Gross profit represents the profitability of core business activities.

    True
  • Gross profit is calculated before accounting for indirect expenses.
  • Gross profit represents the profit made after accounting for all expenses.
    False
  • The main components of an income statement are revenue, expenses, and profit or loss.
  • Direct expenses are directly related to the production of goods or provision of services.