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18 Questions

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Trading Account Preparation

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Questions and Answers

What is the primary aim of a business?

To increase revenue

To make a profit (correct)

To maximize expenses

To minimize losses

In a trading account, what is the difference between the income and expenses?

Revenue

Gross profit (correct)

Net profit

Loss

What is the term often used instead of 'sales' in the trial balance and IS?

Gross profit

Revenue (correct)

Income

Profit

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 Signup and view all the answers

What is the profit and loss account concerned with?

Profits, losses, gains, and expenses Signup and view all the answers

What is the format of a trading account that looks more like an arithmetic calculation?

Vertical format Signup and view all the answers

What type of account is B Dawg's account classified as in the context of the business?

Trade Debtor Signup and view all the answers

What is the purpose of preparing a trial balance?

To ensure total debits equal total credits Signup and view all the answers

What happens when the debit side of a ledger account is heavier than the credit side?

The difference is entered as a credit entry Signup and view all the answers

What is the term for the process of bringing down the balance from the previous month?

Making a balance b/d entry Signup and view all the answers

What is a trade creditor also known as?

Trade Payables Signup and view all the answers

What is the outcome when total debits do not equal total credits in the trial balance?

There is an error in the accounting records Signup and view all the answers

What is the primary purpose of financial statements in different organisations?

To evaluate the profitability of the organisation Signup and view all the answers

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 Signup and view all the answers

What is the formula to calculate the Cost of Goods Sold (COS)?

COS = OS + P - CS Signup and view all the answers

What is the purpose of preparing a Balance Sheet?

To show the financial position of the business at a specific point in time Signup and view all the answers

What type of business organisation is characterised by unlimited liability?

Sole proprietorship Signup and view all the answers

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 Signup and view all the answers