chapter 8 - financial statements - part a

Question 1

definition of:

income statement

Answer 1

statement prepared for a trading period to show gross profit and profit for the year

Question 2

definition of:

gross profit

Answer 2

difference between selling price and cost of those goods

Question 3

definition of:

profit for the year

Answer 3

final profit after any other income has been added to gross profit and the running expenses have been deducted

Question 4

income statement structure

Answer 4

revenue - sales return= a

(cost of sales)
opening inventory + purchases - purchases return + carriage inwards - goods for own use - closing inventory
= b

a - b = gross profit

gross profit + other incomes - other expenses = profit for the year

Question 5

capital and drawings account

Answer 5

business makes profit, credit profit to add with capital; business makes loss, debit loss

debit drawings in capital account

Question 6

definition of:

service business

Answer 6

one which provides a service

-only profit and loss section

Question 7

definition of:

trading business

Answer 7

one which buys and sells goods

-trading section and profit and loss section