Which financial statement of a sole trader reports revenue, cost of sales and operating expenses for an accounting period?
Correct answer: B. Income statement
- A. Statement of financial position
- B. Income statement
- C. Statement of cash flows
- D. Capital account
Explanation
The income statement measures financial performance over a period by matching income with related expenses. The statement of financial position instead reports assets, liabilities and capital at a specific date.
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About Financial Statements of Sole Traders
Sole trader statements calculate revenue, cost of sales, gross profit, operating expenses and net profit, then present assets, liabilities and owner’s capital in the statement of financial position. Adjustments for closing inventory, accruals, prepayments, depreciation, bad debts, drawings and additional capital connect the two statements.
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More Financial Statements of Sole Traders questions
A sole trader has opening capital of Rs. 300,000, profit of Rs. 80,000, drawings of Rs. 25,000 and additional capital of Rs. 40,000 during the year. What is the closing capital?
A sole trader purchases a delivery van on credit. How should this transaction be recorded?
Which accounting equation represents the relationship used in a sole trader's statement of financial position?
A sole trader's sales are Rs. 180,000 and sales returns are Rs. 12,000. What amount is reported as net sales?
A sole trader buys goods on credit for resale. Which account is credited when the purchase is recorded?
Which item is shown as a current asset in a sole trader's statement of financial position?