In the income statement of a sole trader, which of the following is considered a

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Question: In the income statement of a sole trader, which of the following is considered an expense?

Options:

Correct Answer: Cost of Goods Sold

Solution:

Cost of Goods Sold is an expense that is deducted from sales revenue to calculate gross profit.

In the income statement of a sole trader, which of the following is considered an expense?

In the income statement of a sole trader, which of the following is considered an expense?

Step 1: Understand what an income statement is. It shows how much money a business makes and spends over a certain period.
Step 2: Identify the main parts of the income statement. These include sales revenue, expenses, and profit.
Step 3: Know that expenses are costs that a business incurs to operate. They reduce the total profit.
Step 4: Learn about Cost of Goods Sold (COGS). This is the direct cost of producing the goods that a business sells.
Step 5: Recognize that COGS is deducted from sales revenue to find out how much gross profit the business makes.
Step 6: Conclude that COGS is indeed an expense in the income statement of a sole trader.

Income Statement Components – Understanding the different components of an income statement, including revenues and expenses.
Cost of Goods Sold (COGS) – Recognizing COGS as a direct expense related to the production of goods sold by a business.