BUSINESS - 5.3.2 INCOME STATEMENTS

Income Statement Practice Questions

  • Focuses on understanding and interpreting income statements
  • Covers key concepts like gross profit and retained earnings
  • Includes practical calculations using real-world business scenarios
  • Designed for Grade 9 students with medium difficulty

Here are the first 3 questions. Click “View all questions” to see the complete assessment.

Q1.

Which description correctly explains cost of sales in an income statement?

  1. A) The portion of profit kept in the business
  2. B) All money spent by the business during the accounting period
  3. C) The cost of the goods that were sold during the accounting period
  4. D) The amount received from selling non-current assets

Q2.

A wholesaler has revenue of $140,000 and cost of sales of $92,000. What is its gross profit?

  1. A) $140,000
  2. B) $232,000
  3. C) $48,000
  4. D) $92,000

Q3.

A business reports gross profit of $64,000 and operating expenses of $47,500. What profit should appear after these expenses are deducted?

  1. A) $64,000
  2. B) $16,500
  3. C) $47,500
  4. D) $111,500

Q4.

A retailer's revenue increased this year, but its gross profit decreased. Which explanation is most likely?

  1. A) The business retained more of its profit
  2. B) Cost of sales increased by more than revenue
  3. C) Dividends decreased by more than revenue
  4. D) Operating expenses decreased while revenue increased

Q5.

A company earns a profit of $28,000 and pays $9,000 of this amount to shareholders as dividends. How much profit is retained in the business?

  1. A) $19,000
  2. B) $28,000
  3. C) $9,000
  4. D) $37,000

Q6.

Which sequence shows the main income statement items in a logical order?

  1. A) Revenue → cost of sales → gross profit → expenses → profit
  2. B) Gross profit → revenue → cost of sales → retained profit → expenses
  3. C) Cost of sales → revenue → profit → expenses → gross profit
  4. D) Revenue → expenses → retained profit → cost of sales → gross profit

Q7.

A bookkeeper deducts both cost of sales and office expenses from revenue and labels the result as gross profit. Why is this incorrect?

  1. A) Gross profit is found before office expenses are deducted
  2. B) Gross profit is found after dividends are deducted
  3. C) Office expenses should be included in revenue
  4. D) Cost of sales should be added to revenue

Q8.

A company reports profit of $36,000 but retains only $21,000. What most likely happened to the remaining $15,000?

  1. A) It was added to cost of sales
  2. B) It was added to revenue
  3. C) It was distributed to shareholders as dividends
  4. D) It was recorded as gross profit

Q9.

Study the income statement extract in the figure. What should replace the label X?

  1. A) Gross profit
  2. B) Operating expenses
  3. C) Cost of sales
  4. D) Retained profit

Q10.

Use the figures shown for Company A and Company B. Which statement is correct?

  1. A) Company A has lower profit but higher retained profit than Company B
  2. B) Both companies have the same profit and retained profit
  3. C) Company B has lower profit and higher retained profit than Company A
  4. D) Company A has higher profit and higher retained profit than Company B

What this assessment covers

Concepts tested

  • Cost of sales and its role in income statements
  • Calculation of gross profit from revenue and expenses
  • Understanding retained earnings and dividend distribution
  • Logical sequence of items in an income statement
  • Common errors in financial statement preparation

Question Mix

  • Medium questions included

Skills you build

  • Interpreting financial data from income statements
  • Calculating gross and net profits accurately
  • Analyzing changes in financial performance
  • Identifying errors in financial reporting
  • Understanding financial terminology and concepts

Related assessments

More practice

Other assessments in this subject