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When a company buys a building, it normally records the entire cost of the asset as an up-front expense on the income statement.

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True

False

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.

A company's revenue may also be called by what other word?

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Sales

Gross profit

Retained earnings

Any of the above

Sales. For accounting purposes, it usually is called revenue.

The expense that represents a piece of equipment's normal wear and tear over time is called what?

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Depreciation expense

Amortization expense

Administrative expense

Cost of goods sold

Depreciation expense. Depreciation refers to a tangible asset's gradual loss of value over time.

Which of the following expenses is subtracted from sales when calculating operating profit?

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Interest

SGA

Taxes

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.

The expenses directly incurred in creating the goods or services that a company sells are called _______.

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Cost of sales

Cost of goods sold

Cost of services

All of the above

All of the above. These are all different terms used for these expenses.

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