The balance on the profit and loss account, as shown in the balance sheet of a company, represents?
Select ONE answer:
- any profit earned by the company during the most recent accounting period.
- the cumulative profits earned by the company since the date of its incorporation, less any losses, dividends, or transfers to reserves.
- money set aside for specific future uses.
- 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
- Not correct – The profit earned during the most recent accounting period is shown in the Profit and Loss Account.
- Correct
- Not correct – The balance on the profit and loss account is a profit or a loss – cash is not the same as profit.
- Not correct – As for answer C above.
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