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