15 Questions
What is the purpose of an Income Statement?
To show how income is generated and what it costs to generate that income
What is the term used to describe the cost of the goods sold in a business?
Cost of Goods Sold
What is the result of subtracting the Cost of Goods Sold from Sales?
Gross Profit
What is the formula for calculating Gross Profit?
Sales - COGS (Cost of Goods Sold) = Gross Profit
Why is it called 'gross' profit?
Because it hasn't taken out all the other costs of doing business
What are some examples of other costs of doing business?
Expenses
What is another name for Net Profit?
Bottom line
What are the two financial statements mentioned in the text?
Beginning Balance Sheet and Ending Balance Sheet
What does the Beginning Balance Sheet show?
Where we started
What does the Ending Balance Sheet show?
Where we are
What connects the beginning and ending balance sheets?
The Income Statement
What is the purpose of the Income Statement?
The purpose of the Income Statement is to show the revenue, expenses, and net profit of a business during a specific period of time.
What is the equation to calculate the Cost of Goods Sold?
Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold.
What is the purpose of the Balance Sheet?
The purpose of the Balance Sheet is to show the financial position of a business at a specific point in time, including its assets, liabilities, and equity.
Why is Ending Inventory included in the Balance Sheet and not the Cost of Goods Sold?
Ending Inventory is included in the Balance Sheet because it represents the value of inventory that has not been sold and can still be sold in the future.
Test your knowledge of beginning inventory and business start-up costs with this quiz. See if you can determine the correct amount of beginning inventory and identify the expenses incurred when starting a new business.
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