Accounting Online Program Certification Practice Test

What is the correct charge for gas in the sole trader's statement of profit or loss for the year ended 30 November 20X7?

1. £2,100

2. £2,300

3. £2,500

4. £1,900

The correct answer is: £2,100

To determine the correct charge for gas in the sole trader's statement of profit or loss for the year ended 30 November 20X7, it is essential to consider the concept of accrual accounting. Under this principle, expenses should be recognized in the financial statements when they are incurred, not necessarily when they are paid in cash. In this scenario, if the gas expense charged to the statement of profit or loss is £2,100, it suggests that this figure reflects the costs incurred for gas during the accounting period in question—that is, any gas used during the year, accounting for any adjustments for prepaid or accrued expenses that may apply. The amount can include any outstanding bills or adjustments made to reflect the actual consumption of gas during the year. Moreover, it is important to verify the figures used in calculations, as they may include monthly usages, estimates, or contractual rates applicable specifically for the period being assessed. By confirming that £2,100 accurately represents the total cost of gas incurred during the specified year, we can conclude that this is the correct charge for the statement of profit or loss. This understanding of expense recognition is fundamental in accounting, ensuring that all costs are appropriately matched against the revenues generated in the same period.