Bookkeeping 24

Question 1

1. Where do you find GROSS PROFIT?

Answer 1

Income Statement

INCOME
   Sales Rev………260k
   Sales Rev………150k
         Total Rev……..…..400k
   Less COGS……………125k
         GROSS PROFIT…..275k

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Question 2

2. What is the format for the Income Statement?

Answer 2

INCOME…………….100k
EXPENSES……………60k
NET INCOME…………40k

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Question 3

3. What is the FORMAT under INCOME?

Answer 3

INCOME
     Sales Rev…………250k
     Service Rev……….150k
            Total Rev…………….400k
     Less COGS……………….125k
              GROSS PROFIT……275K

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Question 4

4. What is the format under the EXPENSES section of the INCOME STATEMENT?

Answer 4

EXPENSES
    Salaries………………..120k
    Rent…………………….100k
    Utilities………………….15k
    Insurance…………………2k
    Depreciation……………..1k
    Bad Debts……………….1k
           TOTAL EXP…………..239k

Question 5

5. What is the ORDER in which EXPENSES are listed on the INCOME STATEMENT?

Answer 5

Customarily they are listed in declining order of value, thought the owners may prefer some other arrangement.

Question 6

6. What is the NET INCOME as it appears on the bottom line of the Income Statement?

Answer 6

It represents the EARNINGS of the company- its PROFIT.

Question 7

7. Sometimes NET INCOME represents earnings before:

Answer 7

Federal Corporate Income Taxes are computed (NET PROFIT BEFORE TAXES), and another computation is made in which taxes are subtracted (NET PROFIT AFTER TAXES).

Question 8

8. For a proprietorship NOT subject to CORPORATE INCOME TAXES, the bottom line of the INCOME STATEMENT represents:

Answer 8

both NET INCOME and PROFIT.

Question 9

9. The OPERATING STATEMENT (Income Statement) answers the question:

Answer 9

“DID WE MAKE A PROFIT?”

Question 10

10. The BALANCE SHEET answers the question:

Answer 10

“WHAT FINANCIAL SHAPE ARE WE IN?”