profit and loss account test this test consists of 10 questions designed to test your understanding...

Profit and Loss Account Profit and Loss Account TestTest

This test consists of 10 questions This test consists of 10 questions designed to test your understanding of designed to test your understanding of Profit and Loss Accounts as well as Profit and Loss Accounts as well as analysis of P&L account analysis.analysis of P&L account analysis.

The links provide you with a choice of The links provide you with a choice of answer, along with explanations and answer, along with explanations and solutions.solutions.

You will need a calculator to complete You will need a calculator to complete this test.this test.

Question 1.Question 1.

A Profit and Loss Account shows us a A Profit and Loss Account shows us a snapshot in time of the companies trading snapshot in time of the companies trading activities.activities.

a. Falsea. False

b. Trueb. True

The Profit and Loss Account is a historical record of trading activities, normally showing the previous 12 months

Your answer is correct.

A Balance Sheet gives us a snapshot in time of a companies assets and liabilities. The Profit and Loss Account is a historical record of trading activities, normally showing the previous 12 months

Question 2.Question 2.

Sales less Cost of Sales gives us?Sales less Cost of Sales gives us?

A. Net ProfitA. Net Profit

B. ExpensesB. Expenses

C. Gross ProfitC. Gross Profit

Net Profit is found by taking expenses fromGross Profit. Try Again

Total expenses are found by adding together individual expenses, or by taking Net Profitfrom Gross Profit. Try again.

Correct. Sales less Cost of Sales =Gross Profit.

Question 3.Question 3.

A firm has an opening stock of £37,000, a A firm has an opening stock of £37,000, a closing stock of £29,000, and has closing stock of £29,000, and has purchasing during the year stock costing purchasing during the year stock costing £121,000. What is the firms cost of sales?£121,000. What is the firms cost of sales?

A. £115,000A. £115,000

B. £129,000B. £129,000

C. £140,000C. £140,000

Wrong. To calculate cost of sales add purchases toopening stock and take away closing stock. Try again.

Correct. To calculate cost of sales you added purchases to opening stock and took away closing stock.

Wrong. To calculate cost of sales add purchases toopening stock and take away closing stock. Try again.

Question 4.Question 4.

A firm has a gross profit of £854,000 and a A firm has a gross profit of £854,000 and a net profit of £421,000. What are the firms net profit of £421,000. What are the firms expenses?expenses?

A. £1,275,000A. £1,275,000

B. £450,000B. £450,000

C. £433,000C. £433,000

Wrong. To find expenses take net profitfrom gross profit. Try again.

Wrong. To find expenses take net profitfrom gross profit. Try again.

Correct. To find expenses you took net profitfrom gross profit.

Question 5.Question 5.

Which of the following defines Which of the following defines

mark up?mark up?

A. The % difference between net profit and A. The % difference between net profit and gross profitgross profit

B. The difference between purchase price and B. The difference between purchase price and gross profit, as a % of purchase price.gross profit, as a % of purchase price.

Wrong. Mark up is the difference between purchase price and gross profit, as a % of purchase price.

Correct Mark up is the difference between purchase price and gross profit, as a % of purchase price.

Question 6.Question 6.

A firm with gross profit of £67,000 has a sales A firm with gross profit of £67,000 has a sales figure of £521,000. What is the firms gross figure of £521,000. What is the firms gross profit margin.?profit margin.?

A. 12.86%A. 12.86%

B. 7.77%B. 7.77%

C. 34%C. 34%

Correct. You calculated Gross Profit as a Percentageof Sales.

Wrong. To find GPM you must calculate Gross Profit as a Percentageof Sales.

Wrong. To find GPM you must calculate Gross Profit as a Percentageof Sales.

Question 7.Question 7.

Which of the following defines The Bottom Which of the following defines The Bottom Line?Line?

A. The lowest level sales can fall to if the firm A. The lowest level sales can fall to if the firm is to stay profitable.is to stay profitable.

B. Profit remaining after all costs of the firmB. Profit remaining after all costs of the firm

have been paidhave been paid

Wrong. The bottom line is Profit remaining after all costs of the firmhave been paid

Correct.

Question 8.Question 8.

Which of the following Which of the following

firms is likely to have the highest GPM?firms is likely to have the highest GPM?

A. A supermarketA. A supermarket

B. A restaurantB. A restaurant

C. A travel agentC. A travel agent

Wrong. Supermarkets have low GPM’s

Correct. Restaurants have high GPM’s. With ahigh level of expenses, this is to be expected.

Wrong. Good Net profits will depend upona high level of sales, each with a low gross profitmargin.

Question 9.Question 9.

Which of the following firms is likely to have Which of the following firms is likely to have low expenses in proportion to cost of saleslow expenses in proportion to cost of sales

A. A jewelersA. A jewelers

B. A restaurantB. A restaurant

C. A petrol stationC. A petrol station

Wrong. This type of business has a high proportionof expenses to cost of sales.

Wrong. This type of business has a high proportionof expenses to cost of sales.

Correct. This type of business has a low proportionof expenses to cost of sales.

Question 10.Question 10.A computer firm has just launched its new A computer firm has just launched its new

intelligent mouse onto the market. The total intelligent mouse onto the market. The total costs of production are £3.00, the retail costs of production are £3.00, the retail price is £8.00. What is the % mark up?price is £8.00. What is the % mark up?

A. 62.5%A. 62.5%

B. 60%B. 60%

C. 166.67%C. 166.67%

Wrong. To find % mark up, calculate the difference between production and retail prices,as a % of production price.

Wrong. To find % mark up, calculate the difference between production and retail prices,as a % of production price.

Correct.To find % mark up, you calculated the difference between production and retail prices,as a % of production price.

You have now completed the test. For further more detailed revision please use the case studies on

the ALoA web site. www.aloa.co.uk