Trading Accounts

Question 1

Define the term income statement

Answer 1

Is made up of a trading account and a profit and loss account

Question 2

Define the term trading account

Answer 2

The trading account section calculates the gross profit (or loss) that the business has made from selling its products or services.

Question 3

What is a profit and loss account

Answer 3

The profit and loss account calculates the net profit (or loss) after deducting expenses from the gross profit figure.

Question 4

Define the term sales

Answer 4

Sales is the value of the goods sold by the business.

Question 5

Define the term opening stock

Answer 5

Opening stock is the cost of goods held in stock at the beginning of the financial year. This may be stock of finished goods and/or raw materials.

Question 6

Define the term purchases

Answer 6

Purchases is the cost of goods bought during the year. These goods are bought with the specific intention of reselling them.

Question 7

Define the term carriage inwards

Answer 7

Carriage inwards is the cost of having purchases delivered to the business.

Question 8

Define the term custom duties

Answer 8

Customs duty is a tax paid on purchases from countries outside the EU. This item may also appear as import duty.

Question 9

Define the term closing stock

Answer 9

Closing stock is the value of goods held in stock at the end of the financial year.
This may be stock of raw materials and/ or finished goods.

Question 10

Define the term cost of sales/cost of goods sold

Answer 10

Is the cost to the business of selling the goods that were actually sold during the trading period

Question 11

Define the term sustainability

Answer 11

Sustainability means using resources in a way that meets current needs but also preserves the resources for future generations.