Components of an income statement:

• An income statement summarizes a business's financial performance over a specific period
• Revenue is calculated using the formula: Sales Price × Quantity Sold
• Operating profit is calculated by subtracting operating expenses from gross profit
• Net profit is the final profit after deducting all costs and taxes.


  True
• An income statement can be prepared for a month, quarter, or year.


  True
• The revenue section in an income statement is calculated as: Sales Price × Quantity Sold
• Match the income statement component with its description:

  Revenue ↔️ Total money earned from sales

  COGS ↔️ Direct costs of production

  Gross Profit ↔️ Profit after deducting COGS

  Operating Expenses ↔️ Expenses to run the business
• What are operating expenses in an income statement?

  Costs of running the business
• What does an income statement summarize?

  Financial performance
• How is revenue calculated in an income statement?

  Sales Price × Quantity Sold
• What does operating profit indicate in an income statement?

  Core business profitability
• Revenue is the total amount of money a business earns from selling its products or services.


  True
• COGS includes the cost of raw materials, labor, and manufacturing overheads.


  True
• Why is managing operating expenses crucial for a business?

  To maximize profitability
• What is the purpose of an income statement?

  Summarize financial performance
• How is revenue calculated in an income statement?

  Sales Price × Quantity Sold
• What does COGS represent in accounting terms?

  Direct costs of production
• The formula to calculate COGS is: Beginning Inventory + Purchases - Ending Inventory


  True
• What is calculated by subtracting Operating Expenses from Gross Profit?

  Operating Profit
• Other income and expenses are not directly related to a business's primary operations
• What is the formula to calculate Net Profit?

  Operating Profit - Taxes
• How is revenue calculated in the income statement?

  Sales Price × Quantity Sold
• The formula for calculating COGS is: COGS = Beginning Inventory + Purchases - Ending Inventory
• What does COGS represent in business terms?

  Direct costs of goods
• Rent is considered an operating expense.

  True
• Gross Profit is calculated by subtracting COGS from Revenue
• Operating Profit is calculated by subtracting Operating Expenses from Gross Profit
• How is Net Profit calculated?

  Operating Profit - Taxes
• An income statement highlights revenue generated, costs incurred, and profitability.


  True
• Gross profit is calculated by subtracting COGS from revenue.


  True
• Steps to calculate net profit in an income statement:

  1️⃣ Calculate Gross Profit

  2️⃣ Subtract Operating Expenses

  3️⃣ Calculate Operating Profit

  4️⃣ Deduct Taxes
• Cost of Goods Sold (COGS) is calculated using the formula: Beginning Inventory + Purchases - Ending Inventory
• Revenue represents the total amount of money earned from sales
• The formula to calculate COGS is: Beginning Inventory + Purchases - Ending Inventory
• Operating expenses are necessary for the day-to-day operations of the business
• Gross profit shows the profit earned before other operating expenses are deducted
• Net profit is the final profit after all costs and taxes are deducted.

  True
• COGS includes raw materials, labor, and manufacturing overheads.


  True
• The three components of COGS are Beginning Inventory, Purchases, and Ending Inventory
• Operating Expenses include rent, salaries, and utilities.


  True