Question

on 1 The following questions are testing your basic knowledge. 1.1 What are the financial statements? 1.2 Does the heading of the statement of financial position indicate a period or point of/in time? 1.3 Which financial statement's structure is closest to that of the basic accounting equation? 1.4 Mention one internal user of the financial statement? 1.5 How to calculate operating profit in the comprehensive income statement 1.6 What is the non- operating income?​

Answer 1

1.1 The financial statements are formal reports that provide information about the financial performance and position of a company. The main financial statements are the income statement, statement of financial position, statement of cash flows, and statement of changes in equity.

1.2 The heading of the statement of financial position indicates a point in time, specifically the end of the reporting period. It is sometimes referred to as the balance sheet.

1.3 The financial statement that is closest in structure to the basic accounting equation (Assets = Liabilities + Equity) is the statement of financial position (balance sheet).

1.4 An internal user of the financial statement could be a manager, who uses the information to make decisions about the company's operations, budget, and investments.

1.5 Operating profit is calculated by subtracting the cost of goods sold (COGS) and operating expenses from total revenue. The formula for operating profit is: Operating Profit = Total Revenue - COGS - Operating Expenses.

1.6 Non-operating income is income that is generated by activities that are not related to the company's primary operations. Examples of non-operating income include investment income, gains on the sale of assets, and income from discontinued operations. Non-operating income is reported separately from operating income on the income statement.