IPA IP 2021 Question 29
A question IPA Japan published in 令和3年度 ITパスポート試験 公開問題 問29, translated into English. ITPEC is based on the same exams.
Same question on ITPEC: Oct 2023 Q72
Which of the following is an expression that calculates gross profit?
Explanation
(Sales) − (Cost of sales) — gross profit is the first profit on the income statement.
The income statement builds profit in stages:
- •Sales − cost of sales = gross profit
- •Gross profit − selling, general, and administrative expense = operating profit
- •Operating profit + non-operating income − non-operating expenses = ordinary (current) profit
- •Ordinary profit + extraordinary profit − extraordinary loss = current net profit before tax
- •Net profit before tax − corporate, local and business taxes = current net profit
Answer (a)
Why not others:
- •(b) — adding non-operating income to operating profit and deducting non-operating expenses gives ordinary profit
- •(c) — ordinary profit adjusted for extraordinary profit and loss gives current net profit before tax
- •(d) — deducting taxes from net profit before tax gives current net profit, the last line
Key rule: Each profit on the income statement subtracts one more layer of cost: cost of sales, then SG&A, then non-operating items, then extraordinary items, then taxes.
Corporate Activities · AI-written, may contain errors
This question comes from the past questions IPA Japan publishes, translated into English by ITPEC Practice. ITPEC Practice is an independent study tool and is not affiliated with IPA or ITPEC. See the original paper (PDF) or Report an issue.