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UI Post-UTME Financial Accounting 2024 (Model questions) Question 10

Question 10

Final Accounts of a Sole Trader

A company's profit and loss account for a period is prepared by

  1. A.deducting total expenses from total revenues
  2. B.deducting total cash payments from total revenue
  3. C.deducting all outflows of funds from all inwards of funds
  4. D.balancing its receipts and payments
Show the answer and explanation

Answer: A (deducting total expenses from total revenues)

Explanation

Profit = revenues − expenses for the period.