Trading and Profit and Loss Account Quiz
8 multiple-choice questions with answers and explanations · 2 easy, 5 medium, 1 hard
The trading account and the profit and loss account of a sole trader: gross profit, carriage inwards and outwards, markup versus margin, and net profit.
- 1Trading Account: What Does It Calculate?The trading account (the first section of a trader’s income statement) is prepared to calculate:easy
- 2Profit and Loss Account: What Does It Calculate?The profit and loss account follows the trading account. It starts with gross profit and arrives at:easy
- 3Trading and Profit and Loss Account: Where Does Carriage Outwards Go?Carriage outwards (the cost of delivering goods to customers) is shown:medium
- 4Trading Account: Calculating Gross Profit with Sales ReturnsSales are $95,000, sales returns $5,000, opening inventory $8,000, purchases $60,000 and closing inventory $10,000. What is gross profit?medium
- 5Trading and Profit and Loss Account: Which Item Goes in the Trading Section?Which of the following items belongs in the TRADING account rather than the profit and loss account?medium
- 6Markup vs Margin: Converting a 25% Markup into a Gross MarginA trader sells all goods at a markup of 25% on cost. What is the gross profit margin as a percentage of sales?medium
- 7Closing Inventory: Where Does It Appear in the Final Accounts?Closing inventory appears in the year-end financial statements:medium
- 8Trading and Profit and Loss Account: Net Profit from a Trial Balance ExtractA sole trader has sales $120,000, cost of goods sold $70,000, wages $18,000, rent $6,000, carriage outwards $2,000, discount received $1,000 and drawings $9,000. What is net profit?hard