Accounting-Income statements and balance sheets

Question 1

Explain an income statement

Answer 1

PROFIT OR LOSS STATEMENT
Shows the business’s financial performance in terms of net profit or loss over a specified period. It comprises of Revenues and Expenses.

Question 2

Explain a Gross Profit/Loss

Answer 2

Shows a business’s profit or loss in its operating activity - buying and selling goods.

Question 3

Explain Net Profit/Loss

Answer 3

shows a business’s profit or loss after deducting all other operating expenses.

Question 4

How would you determine the net profit or loss for your business?

Answer 4

It is calculated by deducting expenses from revenue.

Question 5

Explain a balance sheet

Answer 5

STATEMENT OF FINANCIAL POSITION

Presents the financial position of a business at a given date. it is comprised of Assets, Liabilities and Equity.

Question 6

Explain comparative reports:

Answer 6

Show the income statements and balance sheets of a business for two or more years. It tells the owner if a year is a better or worse performance than in previous years. Comparisons over a period of time can show improving or declining trends.

Question 7

Explain Revenue

Answer 7

Income earned by the business.

e.g. sale revenue, interest revenue, rent revenue

Question 8

Explain Expenses

Answer 8

Costs incurred by a business in order to earn revenue and keep the business operating
e.g. wages, electricity, rent

Question 9

Explain assets

Answer 9

Items of value owned by the business

e.g. inventories, accounts receivable, motor vehicle

Question 10

explain liabilities

Answer 10

amounts owed by the business

e.g. Accounts payable, loans

Question 11

Explain owners equity

Answer 11

the amount of the owners investment in a business and therefore the amount that the business owes back to the owner.