18 Questions
What is the primary aim of a business?
To make a profit
In a trading account, what is the difference between the income and expenses?
Gross profit
What is the term often used instead of 'sales' in the trial balance and IS?
Revenue
In a vertical format, what does the heading of a trading account section look like?
Income Statement (Trading A/C section/Profit and loss A/C section) for the year ended
What is the profit and loss account concerned with?
Profits, losses, gains, and expenses
What is the format of a trading account that looks more like an arithmetic calculation?
Vertical format
What type of account is B Dawg's account classified as in the context of the business?
Trade Debtor
What is the purpose of preparing a trial balance?
To ensure total debits equal total credits
What happens when the debit side of a ledger account is heavier than the credit side?
The difference is entered as a credit entry
What is the term for the process of bringing down the balance from the previous month?
Making a balance b/d entry
What is a trade creditor also known as?
Trade Payables
What is the outcome when total debits do not equal total credits in the trial balance?
There is an error in the accounting records
What is the primary purpose of financial statements in different organisations?
To evaluate the profitability of the organisation
What is the main difference between Trading Account and Profit and Loss Account?
Trading Account calculates gross profit, while Profit and Loss Account calculates net profit
What is the formula to calculate the Cost of Goods Sold (COS)?
COS = OS + P - CS
What is the purpose of preparing a Balance Sheet?
To show the financial position of the business at a specific point in time
What type of business organisation is characterised by unlimited liability?
Sole proprietorship
What is the main difference between a trading business and a manufacturing business?
A trading business buys and sells goods, while a manufacturing business produces goods
Learn about the two formats of preparing a trading account, horizontal and vertical, and how to calculate gross profit or loss. Understand the difference between revenue and sales in a trial balance.
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