Lesson 5.10.1

5.10.1 Income statements Quiz: OCR Business, Unit 5

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 5.10.1, Income statements: 20 multiple choice questions for the OCR Business (H431), Unit 5: Accounting and finance, written with Revision Ninja.

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The 20 questions

  1. What does an income statement record over a given trading period?

    • Financial position
    • Financial performance
    • Capital structure
    • Cash flows

  2. What is subtracted from sales revenue to calculate gross profit?

    • Corporation tax
    • Cost of sales
    • Dividend payments
    • Operating expenses

  3. What is another term commonly used for revenue on an income statement?

    • Net profit
    • Capital employed
    • Turnover
    • Gross margin

  4. Which section of an income statement includes overhead expenses like rent and advertising?

    • Non-current assets
    • Cost of sales
    • Capital reserve
    • Expenses

  5. What is subtracted from gross profit to calculate operating profit?

    • Cost of sales
    • Interest payments
    • Dividends paid
    • Operating expenses

  6. What is deducted from operating profit to calculate profit before tax?

    • Cost of sales
    • Dividend payments
    • Retained earnings
    • Finance costs

  7. Where does retained profit from the income statement transfer next?

    • Tax authority ledger
    • Statement of financial position
    • Asset depreciation schedule
    • Cash flow forecast

  8. Which stakeholders use the income statement to assess potential returns on investment?

    • Debt collectors
    • Shareholders
    • Suppliers
    • Local council

  9. A firm has revenue of £100,000 and cost of sales of £40,000. What is its gross profit?

    • £140,000
    • £60,000
    • £40,000
    • £2.50

  10. A shop generates £50,000 revenue, £20,000 gross profit, and £5,000 expenses. What is its operating profit?

    • £15,000
    • £10,000
    • £30,000
    • £25,000

  11. If a company has £80,000 operating profit and £10,000 interest expense, what is profit before tax?

    • £70,000
    • £80,000
    • £8,000
    • £90,000

  12. A business has gross profit of £30,000 and total revenue of £120,000. What is cost of sales?

    • £40,000
    • £90,000
    • £4,000
    • £150,000

  13. Which item is classified as part of cost of sales for a bakery?

    • Flour and sugar
    • Manager salary
    • Shop rent
    • Van depreciation

  14. If profit after tax is £40,000 and dividends are £15,000, what is retained profit?

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

  15. A manager notices rising rent and utility bills. Which profit figure is directly reduced?

    • Total revenue
    • Operating profit
    • Opening inventory
    • Gross profit

  16. A firm reports £200,000 revenue, £120,000 cost of sales, and £50,000 expenses. What is operating profit?

    • £50,000
    • £80,000
    • £30,000
    • £150,000

  17. Why might a business showing high profit on its income statement still fail?

    • High gross margin
    • Poor cash flow
    • Excessive retained earnings
    • Low tax liability

  18. Which accounting principle requires matching revenue with costs incurred in the same period?

    • Going concern
    • Accruals concept
    • Prudence concept
    • Money measurement

  19. How does an increase in opening inventory affect the cost of sales calculation?

    • Has no effect
    • Increases cost
    • Decreases cost
    • Reduces sales directly

  20. Why do potential lenders inspect a firm's operating profit on the income statement?

    • Calculate working capital
    • Assess interest cover
    • Check acid test
    • Audit stock levels

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