Day: May 12, 2020

The balance on the profit and loss account, as shown in the balance sheet of a company, represents?

Select ONE answer:

1. any profit earned by the company during the most recent accounting period.
2. the cumulative profits earned by the company since the date of its incorporation, less any losses, dividends, or transfers to reserves.
3. money set aside for specific future uses.
4. money available for daily operations.

Show your workings to arrive at your answer, and explain and justify your reasons:

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This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct – The profit earned during the most recent accounting period is shown in the Profit and Loss Account.
2. Correct
3. Not correct – The balance on the profit and loss account is a profit or a loss – cash is not the same as profit.
4. Not correct – As for answer C above.

 

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