Profit and Loss Account Test This test consists of 10 questions designed to test your understanding of Profit and Loss Accounts as well as analysis of P&L account analysis. The links provide you with a choice of answer, along with explanations and solutions. You will need a calculator to complete this test.
Question 1. A Profit and Loss Account shows us a snapshot in time of the companies trading activities. a. False b. 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. Sales less Cost of Sales gives us? Sales less Cost of Sales gives us? A. Net Profit B. Expenses C. Gross Profit
Net Profit is found by taking expenses from Gross Profit. Try Again
Total expenses are found by adding together individual expenses, or by taking Net Profit from Gross Profit. Try again.
Correct. Sales less Cost of Sales = Gross Profit.
Question 3. A firm has an opening stock of £37,000, a closing stock of £29,000, and has purchasing during the year stock costing £121,000. What is the firms cost of sales? A. £115,000 B. £129,000 C. £140,000
Wrong. To calculate cost of sales add purchases to opening 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 to opening stock and take away closing stock. Try again.
Question 4. A firm has a gross profit of £854,000 and a net profit of £421,000. What are the firms expenses? A. £1,275,000 B. £450,000 C. £433,000
Wrong. To find expenses take net profit from gross profit. Try again.
Wrong. To find expenses take net profit from gross profit. Try again.
Correct. To find expenses you took net profit from gross profit.
Question 5. Which of the following defines mark up? A. The % difference between net profit and gross profit B. The difference between purchase price and 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. A firm with gross profit of £67,000 has a sales figure of £521,000. What is the firms gross profit margin.? A % B. 7.77% C. 34%
Correct. You calculated Gross Profit as a Percentage of Sales.
Wrong. To find GPM you must calculate Gross Profit as a Percentage of Sales.
Wrong. To find GPM you must calculate Gross Profit as a Percentage of Sales.
Question 7. Which of the following defines The Bottom Line? A. The lowest level sales can fall to if the firm is to stay profitable. B. Profit remaining after all costs of the firm have been paid
Wrong. The bottom line is Profit remaining after all costs of the firm have been paid
Correct.
Question 8. Which of the following firms is likely to have the highest GPM? A. A supermarket B. A restaurant C. A travel agent
Wrong. Supermarkets have low GPM’s
Correct. Restaurants have high GPM’s. With a high level of expenses, this is to be expected.
Wrong. Good Net profits will depend upon a high level of sales, each with a low gross profit margin.
Question 9. Which of the following firms is likely to have low expenses in proportion to cost of sales A. A jewelers B. A restaurant C. A petrol station
Wrong. This type of business has a high proportion of expenses to cost of sales.
Wrong. This type of business has a high proportion of expenses to cost of sales.
Correct. This type of business has a low proportion of expenses to cost of sales.
Question 10. A computer firm has just launched its new intelligent mouse onto the market. The total costs of production are £3.00, the retail price is £8.00. What is the % mark up? A. 62.5% B. 60% C %
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.