1.
This number tells you the amount of money the company spent to
produce the goods it sold during the accounting period.
Revenue or Sales
Operating Expenses
Cost of Sales
Gross Profit
2. Only manufacturing or merchandising companies have cost of
sales since they make or buy products to sell to others.
True
False
3. Sales or Revenue minus costs of sales is called
“gross profit” or sometimes “gross margin.
Operating Income
Net Sales
Net Income
4. These are expenses that go toward supporting a company’s
operations for a given period – for example, salaries of
administrative personnel and costs, marketing and selling, and, or
researching new products
Cost of Sales
Administrative Expenses
Operating Expenses
Cost of Operations
5. Operating expenses are different from “costs of sales,”
which were deducted above, because operating expenses cannot be
linked directly to the production of the products or services being
sold.
True
False
6. Generally Accepted Accounting Principles (GAAP) indicates
that sales or revenue is reported by an organization when
cash must have been received.
the entity must expect to receive cash in the future.
the entity must have paid for all expenses incurred in
generating the revenue.
the revenue has been earned by delivery or shipment of the
good or service and is realizable