Which of the following ledger account balances would appear on the statement of profit or loss?
Select one:
A. Receivables B. Delivery van C. Sales D. Payables
The correct answer and explanation is:
The correct answer is C. Sales.
Explanation:
The statement of profit or loss (also known as the income statement) is a financial report that shows the revenues, costs, and expenses of a business during a specific period, typically a fiscal quarter or year. The primary purpose of this statement is to provide insight into the company’s financial performance by determining the profit or loss.
Now, let’s analyze each of the options:
- Receivables: Receivables are amounts owed to the business by customers for goods or services already provided but not yet paid for. These amounts are considered assets and are recorded on the balance sheet, not the profit or loss statement. Receivables affect cash flow, but they don’t directly contribute to the profit or loss in the period they are recorded.
- Delivery Van: The delivery van is a tangible fixed asset (a non-current asset). It appears on the balance sheet as part of the company’s property, plant, and equipment. The purchase of the van would not affect the profit or loss statement directly, though depreciation of the van (the gradual reduction of its value over time) would be recorded as an expense on the statement of profit or loss.
- Sales: Sales represent the total income earned from selling goods or services during the period. Sales are a key revenue item that directly affects the profit or loss. The revenue from sales is recognized on the statement of profit or loss when it is earned, and it forms the top line of the income statement.
- Payables: Payables represent amounts that the business owes to suppliers or creditors for goods and services that have been received but not yet paid for. These amounts are considered liabilities and appear on the balance sheet. While payables can influence cash flow and impact expenses (through interest or penalties), they are not directly shown on the profit or loss statement.
Conclusion:
Among the options, Sales is the only item that directly appears on the statement of profit or loss, reflecting the company’s revenue for the period.