Week 2 - What Makes Up the Statement of Profit or Loss

Question 1

What does the statement of profit or loss tell us?

Answer 1

It provides information about the performance of an entity over a period of time (normally a financial year)

Question 2

What are the two elements that make up the statement of profit or loss?

Answer 2

Income (value flowing into the company) and expenses (value flowing out of the company)

Question 3

What are the two types of income defined by IFRS?

Answer 3

• revenue
• other income

Question 4

Revenue

Answer 4

• arises from the ‘ordinary activities of the entity’
• i.e sales of goods, provision of services

Question 5

Other income

Answer 5

• income that is not revenue
• e.g profit on sale of an item of property, plant and equipment

Question 6

What are the five types of expense that usually make up the statement of profit or loss?

Answer 6

• cost of sales
• distribution costs
• administrative expenses
• finance costs
• tax expenses

Question 7

What are the five subtitles on the balance sheet?

Answer 7

• gross profit (revenue - sales)
• trading profit (less distribution and administrative costs)
• operating profit
• profit before taxation