Week 3 - Income Statement

Question 1

What is the Statement of Profit and Loss

Answer 1

a Record of Income Generated, and Expenditure Incurred over a Given Period of Time

Question 2

What are 3 Useful Factors of Income Statement

Answer 2

• How Well Business Performed in the Last Period
• Provide Basis for Predicting Future Performance
• Helps Assess Risk or Uncertainty of Achieving Future Cash Flow

Question 3

Explain 3 Points of the Accrual Concept

Answer 3

• Accountants Divide the Economic Life of a Business into Artificial Time Periods
• Generally a month, quarter or a year
• a Business’ Accounting Year isn’t necessarily the same as the calendar year

Question 4

3 Points for Accrual-Basis Accounting

Answer 4

• Transactions Recorded in the Periods in which the Events Occur
• Revenues are Recognized when Earned, rather than when cash is received
• Expenses are Recognised when Incurred, rather than when paid

Question 5

2 Points for Cash-Basis Accounting

Answer 5

• Revenues are Recognised when Cash is Received
• Expenses are Recognised when Cash is Paid

Question 5

What is the Formula for GROSS PROFIT?

Answer 5

GP = Sales Revenue - Cost of Sales

Question 6

What is the Formula for OPERATING PROFIT

Answer 6

OP = Gross Profit - Operating Expenses

Question 7

What is the Formula for Profit for the Period?

Answer 7

PftP = Operating Profit - Interest Payable + Interest Receivable

Question 8

What is the Formula for Cost of Sales?

Answer 8

actual answer : Opening Inventory + Purchases - Closing Inventory

ppt says : the Direct Costs Incurred for Goods / Services Sold in the Period

Question 9

What does Depreciation Represent?

Answer 9

represents the Loss in Value of this Asset Over Time

Question 10

What are the 2 Methods of Depreciation?

Answer 10

• STRAIGHT LINE - the Loss of Value will Spread Equally Over the Useful Life of an Asset, Depreciation Amount is Same Each Year
• REDUCING BALANCE - Each Year you work out Depreciation Charge as a % Of the Accoutning Value Brought Forward

Question 11

What is BAD DEBT?

Answer 11

if Debtors Couldn’t Settle the Debt, the Amount that Cannot be Recovered is known as Bad Debt