Chapter 3

Question 1

The income statement?

Answer 1

shows how much profit or loss a business has made over a specific period by comparing revenue and expenses.

Question 2

Revenue?

Answer 2

Revenue is the money a business earns from selling goods or providing services. It’s the total income before subtracting any costs or expenses. ( revenue= quantity sold*selling price= 8 shirts * 5$ = 40$(revenue))

Question 3

Expenses?

Answer 3

Expenses are the money a business spends to keep running and make sales. ( if a bakery sells cakes, its expenses include buying ingredients (like flour and sugar), paying workers, rent for the shop, electricity, and repairs for equipment. These are all necessary to make and sell the cakes.)

Question 4

To calculate profit or loss for a period formula?

Answer 4

Profit (or loss) for the period = Total revenue - Total expenses

Question 5

statement of financial position (also known as the balance sheet)?

Answer 5

shows a company’s assets, liabilities, and equity at a specific point in time.

Question 6

Gross Profit?

Answer 6

the money left after covering the basic costs of making the products.

Question 7

Depreciation method?

Answer 7

straight line method- Example: If an asset costs $10,000, has a residual value of $2,000, and a useful life of 4 years, the depreciation expense is:
Depreciationperyear
=Cost−Residualvalue:Usefullife=
10,000−2,000:4
=2,000 peryear.
Depreciationperyear=
Usefullife
Cost−Residualvalue
​ = 4: 10,000−2,000
​ =2,000peryear.