Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
1.
A company's cost of sales represents all of the expenses directly incurred in _______.
Creating goods or services. Cost of sales is also known as cost of goods sold or cost of services.
2.
When a company buys a building, it normally records the entire cost of the asset as an up-front expense on the income statement.
False. The company would record the price on the balance sheet and then, each year, take a part of that cost and expense it on the income statement as a depreciation expense. This is an example of accrual accounting.
3.
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.
4.
A company's revenue may also be called by what other word?
Sales. For accounting purposes, it usually is called revenue.
5.
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.
