1. Expenses that are contractual in nature and are normally paid every month are: a. accounting...

Question:

1. Expenses that are contractual in nature and are normally paid every month are:

a. accounting expenses.

b. automatic expenses.

c. fixed expenses.

d. monthly expenses.

2. The income statement shows earnings before taxes, which is equal to:

a. earnings before taxes minus taxes.

b. gross revenues minus returns and allowances.

c. net sales minus cost of goods sold.

d. operating income minus interest.

e. operating income minus operating expenses.

f. variable expenses.

Expenses

Expenses are defined as the cash outlays that have been incurred and expected to reap benefits to the firm to earn more from its operations. It is usually deducted from the revenue to arrive at taxable income.

Answer and Explanation:

1. The correct answer is c. fixed expenses.

Regardless of the firm's financial performance, these are expenses that must be paid and non-payment constitutes a breach of contract.

2. The correct answer is d. operating income minus interest.

In an income statement, interest and taxes are presented last since the firm wanted to present to the users that the firm can pay interest and taxes through its earnings. Hence, the earnings before taxes come right the interest expense has been deducted.


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Operating Expenses: Definition, Formula & Examples

from Introduction to Business: Homework Help Resource

Chapter 22 / Lesson 43
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