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1.
Which of the following expenses is subtracted from sales when calculating operating profit?
SGA. Operating profit is sometimes called EBIT, or earnings before interest and taxes. Cost of goods sold and SGA are two of the main expenses subtracted from revenue in calculating operating profit.
2.
Under accrual accounting, a company records an expense when _______.
The company has incurred it. A company records an expense when it is incurred. Under accrual accounting, expenses are not necessarily incurred when cash is spent.
3.
The expense that represents a piece of equipment's normal wear and tear over time is called what?
Depreciation expense. Depreciation refers to a tangible asset's gradual loss of value over time.
4.
Different companies recognizing revenue in different ways.
True. How a company recognizes revenue will depend on the nature of its revenue stream. For example, you might pay only once for a service at one company, but several times over time (think insurance premiums) at another place.
5.
A company's sales, minus its cost of sales, is known as _______.
Gross profit. Gross profit is defined as sales (or revenue) minus cost of sales.
