CXC Principles of Accounts: Financial Statements

Question 1

What is the primary purpose of the Income Statement?

Accepted Answer

To show the revenues and expenses of a business over a period

Answer

To show the assets and liabilities of a business at a specific date

Answer

To show the cash movements in and out of a business

Answer

To show the long-term financial position of shareholders

Question 2

Which of the following is classified as revenue on an Income Statement?

Accepted Answer

Sales income

Answer

Rent expense

Answer

Cost of goods sold

Answer

Depreciation

Question 3

The formula for calculating Gross Profit is:

Accepted Answer

Net Sales − Cost of Goods Sold

Answer

Net Sales + Cost of Goods Sold

Answer

Net Sales − Operating Expenses

Answer

Revenue − Net Profit

Question 4

Net Profit is calculated as:

Accepted Answer

Gross Profit − Operating Expenses

Answer

Gross Profit + Operating Expenses

Answer

Revenue − Cost of Goods Sold only

Answer

Total Assets − Total Liabilities

Question 5

Which of the following would appear as an expense on the Income Statement?

Accepted Answer

Salaries paid to employees

Answer

Land and buildings

Answer

Accounts receivable

Answer

Closing inventory

Question 6

The term 'accrued expense' in accounting refers to:

Accepted Answer

An expense incurred but not yet paid in cash

Answer

Cash already received for services not yet provided

Answer

An asset that has been fully depreciated

Answer

A payment made in advance for future goods

Question 7

Which accounting concept requires that revenue and related expenses be recorded in the same accounting period?

Accepted Answer

Matching concept

Answer

Going concern concept

Answer

Prudence concept

Answer

Consistency concept