Income Statement quiz level 1 Financial Accounting Quiz Last updated Feb 3, 2026 Share Income Statement quiz level 1 Income Statement quiz level 2 Income Statement level 1 Pass Score 70% The questions change when you repeat the exam 1 / 25 Income statements are prepared using : Cash basis only Market values Future values Accrual accounting Revenues and expenses are matched to periods. 2 / 25 A single-step income statement : Separates operating and non-operating Uses multiple sections Lists all revenues and expenses together Is only for large firms It’s simpler and shorter. 3 / 25 net loss occurs when : Cash < Expenses Assets > Liabilities Expenses > Revenue Revenue > Expenses Loss means expenses exceed revenue. 4 / 25 Gross margin is : Gross profit ÷ Revenue Net income ÷ Assets Expenses ÷ Revenue Revenue ÷ COGS It measures production efficiency. 5 / 25 Depreciation is classified as : Operating expense Cash expense Revenue Asset 6 / 25 A multi-step income statement shows : Only net income Detailed profit stages Cash movements Assets and liabilities It separates gross and operating income. 7 / 25 Operating income is calculated as: Net income − tax Revenue − tax Gross profit − operating expenses Revenue − COGS It shows profit from core operations. 8 / 25 Which item is non-operating ? Salaries Interest income Office rent Sales revenue 9 / 25 Other income includes : Wages COGS Sales revenue Rent earned It comes from non-core activities. 10 / 25 Freight-out is : Other expense Selling expense COGS Administrative expense 11 / 25 Administrative expenses include : Sales discounts Advertising Office salaries Freight out They relate to general business management. 12 / 25 Matching principle means : Matching equity with profit Matching cash inflows with outflows Matching revenues with expenses Matching assets with liabilities 13 / 25 What is the main purpose of an income statement? Show assets only Measure profitability Show financial position Show cash flows It reports revenues, expenses, and profit over a period. 14 / 25 Which comes first on the income statement? Net income Expenses Revenue Tax Revenue is listed at the top. 15 / 25 Net income is : Gross profit Operating income Revenue Profit after all expenses It’s the “bottom line.” 16 / 25 Revenue represents : Owner’s capital Income earned from operations Money spent Money invested Revenue comes from selling goods or services. 17 / 25 The bottom line refers to : Gross profit Revenue Net income Operating income It’s the final profit figure. 18 / 25 Interest expense is: Administrative expense Operating expense Other expense COGS 19 / 25 Selling expenses include: Raw materials Factory rent Sales commissions Inventory Selling expenses support sales activity. 20 / 25 Earnings before tax (EBT) equals : Operating income − interest Net income + tax Revenue − expenses Gross profit − tax 21 / 25 The income statement covers: A period of time A specific point in time Only one day A future period It summarizes performance over a month, quarter, or year. 22 / 25 Gross profit equals : Operating income − tax Revenue − Expenses Revenue − COGS Net income + tax Gross profit shows profit after production costs. 23 / 25 Which is NOT an operating expense? Utilities Salaries Interest expense Rent Interest is a non-operating expense. 24 / 25 Cost of Goods Sold (COGS) includes : Advertising costs Office rent Interest expense Direct production costs COGS relates directly to producing goods sold. 25 / 25 An increase in depreciation will : Increase revenue Increase cash flow Increase net income Decrease net income It’s an expense. Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback income statementIncome Statement quizIncome Statement quiz level 1
