What are Direct and Indirect Income?

Select the correct alternative:

Question (xx)  

Which of the following is revenue?

(a) Purchases

(b) Purchases Return

(c) Sales

(d) Salary Payable

Answer:

(c) Sales

Explanation:

Revenue means Amount received or receivable by the enterprise from its operating activities e.g. sales.

Question (xxiv)

Sale is recognised as revenue

(a) when the contract for sale is entered into.

(b) at the point of sale or performance of service.

(c) after the expiry of credit period allowed to debtors.

(d) after the money collected from the customers.

Answer:

(b) at the point of sale or performance of service

Question (xxv)

The nature of accrued income is

(a) revenue.

(b) liability.

(c) expenses.

(d) asset.

Answer:

(d) asset.

Question (xxxii)

Revenue – Expense is

(a) Asset.

(b) Liability.

(c) Equity.

(d) Income.

Answer:

(d) Income

Question 5

Read the following statements and select the correct option from the following:

Statement I: Gain is a profit of regular nature.

Statement II: Profit is the income earned by the business from activities.

(a) Both statements are correct.

(b) Both statements are incorrect.

(c) Statement I is correct and Statement II is incorrect.

(d) Statement II is correct and Statement I is incorrect.

Answer:

(a) Both statements are correct.

Question 15

Assertion (A): Revenue includes both amounts earned from sale of goods and rendering of services.

Reason (R): Income is excess of revenue and other income over total expenses.

On the basis of the following two statements, identify the correct option out of the following:-

(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)

(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)

(c) Both Assertion (A) and Reason (R) are not correct

(d) Assertion (A) is correct but Reason (R) is not correct

Answer:

(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)

Question 14

Assertion (A): Net Profit is Revenue plus Other Income less Cost of Goods Sold less Expenses.

Reason (R): In case, Cost of Goods Sold plus Expenses is more than Revenue plus Other Income, it is loss.

Based on the above statements, which of the above options is correct?

On the basis of the following two statements, identify the correct option out of the following:-

(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)

(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)

(c) Both Assertion (A) and Reason (R) are not correct

(d) Assertion (A) is correct but Reason (R) is not correct

Answer:

(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)

Question 14

Gross Profit is Net Sales + Cost of Goods Sold. Is it correct and Why?

Answer:

Gross Profit is Net Sales less Cost of Goods Sold. Therefore, it is determined by deducting Cost of Goods Sold from sales realised. Thus, Gross Profit is Net Sales – Cost of Goods Sold.

Question 15

Net Profit is Gross Profit + Other Incomes – Indirect Expenses. Is it correct? Why?

Answer:

Yes, it is correct because Gross Profit is determined by deducting Cost of Goods Sold from Net Sales. Other Incomes being added to Gross Profit and Indirect Expenses being deducted results in Net Profit or Net Loss.