Lesson 6.2.3

6.2.3 Income Statement (Profit and Loss Account) Quiz: NCFE Business & Enterprise, Unit 6

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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The income statement, also called the profit and loss account, shows how a business performed over a trading period. This lesson walks down its layout from sales revenue through cost of sales and gross profit to expenses and net profit, and explains who reads it and why.

Key points

  • The statement starts with sales revenue at the top and works downwards in two stages of deduction.
  • Cost of sales covers only direct costs such as raw materials, and subtracting it from revenue gives gross profit.
  • Expenses such as rent, wages, advertising and loan interest are deducted from gross profit to reach net profit.
  • Net profit is the bottom line and measures performance after every cost of trading, not the amount of cash held.
  • It covers a set trading period, usually one year, which separates it from the balance sheet's single-date snapshot.
  • Banks read it to judge whether profits can cover loan repayments, and a net loss means costs exceeded revenue.
  • Cheaper ingredients cut cost of sales and raise profit, while a price rise with steady sales lifts the revenue line first.

Key terms

Income statement
A financial document setting revenue against costs over a period to show gross and net profit.
Profit and loss account
Another name for the income statement.
Sales revenue
The money earned from selling goods or services, shown first on the statement.
Cost of sales
The direct cost of producing or buying the goods that were sold.
Expenses
Running costs of the whole business, such as rent, wages and advertising.
Net profit
Gross profit minus expenses, often called the bottom line.
Net loss
A negative bottom line, where total costs were greater than revenue.

Host it live on the board and students join with a game code on their own devices, or revise alone with Free Play. The answers are revealed in the game.

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The 20 questions

  1. What two main categories of financial items are shown on a balance sheet?

    • Inflows and outflows
    • Receipts and payments
    • Revenue and expenses
    • Assets and liabilities

  2. What components make up capital employed on a balance sheet?

    • Share capital plus reserves
    • Total assets minus revenue
    • Equity plus non-current liabilities
    • Current assets minus liabilities

  3. Which of these is classified as a non-current asset on a balance sheet?

    • Bank cash
    • Inventory stock
    • Trade receivable
    • Delivery van

  4. Which item is typically listed under current liabilities on a balance sheet?

    • Trade payables
    • Delivery van
    • Share capital
    • Bank mortgage

  5. What does the share capital figure represent on a statement of financial position?

    • Current liabilities
    • Retained earnings
    • Money raised from shares
    • Long-term bank loans

  6. A bank loan repayable in five years appears under which heading?

    • Current liabilities
    • Non-current assets
    • Non-current liabilities
    • Shareholders' equity

  7. What financial term describes the total value of all assets minus all liabilities?

    • Net assets
    • Gross profit
    • Working capital
    • Fixed capital

  8. What specific point in time does a balance sheet report financial position?

    • One particular day
    • Five consecutive years
    • A three-month quarter
    • One financial year

  9. Share capital plus retained profit adds up to which balance sheet total?

    • Capital employed
    • Shareholders' equity
    • Working capital
    • Long-term liabilities

  10. Why do both sides of a balance sheet always equal the same total?

    • Profit equals cash
    • Assets equal claims
    • Equity equals debt
    • Revenue equals costs

  11. Where on a Statement of Financial Position would you find a five-year bank loan?

    • Non-current assets
    • Non-current liabilities
    • Current liabilities
    • Owners' capital

  12. Which section of a Statement of Financial Position lists items the firm expects to turn into cash within twelve months?

    • Owners' capital
    • Non-current assets
    • Current assets
    • Current liabilities

  13. Which of these items is a common example of a current liability?

    • Long-term mortgage
    • Retained profit
    • Factory building
    • Bank overdraft

  14. Ravi puts £20,000 of his own savings into his business. Where will this appear on the Statement of Financial Position?

    • Owners' capital
    • Non-current liabilities
    • Non-current assets
    • Current liabilities

  15. Which item listed below is NOT classed as a non-current asset?

    • Inventory
    • Machinery
    • Equipment
    • Property

  16. Which equation underpins the Statement of Financial Position?

    • Capital = Assets + Liabilities
    • Assets = Liabilities + Capital
    • Liabilities = Assets + Capital
    • Assets + Liabilities = Capital

  17. Which term describes a firm's total long-term funding of equity plus non-current liabilities?

    • Capital employed
    • Retained profit
    • Working capital
    • Net assets

  18. A shop has current assets of £40,000 and current liabilities of £15,000. What is its working capital?

    • £25,000
    • £55,000
    • £15,000
    • £40,000

  19. Where on the Statement of Financial Position are amounts owed to suppliers for credit purchases recorded?

    • Non-current liabilities
    • Current assets
    • Share capital
    • Current liabilities

  20. A van's original cost minus the depreciation charged to date gives which figure in the Statement of Financial Position?

    • Net realisable value
    • Replacement cost
    • Historical cost
    • Net book value

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