Question

Arrange the following items related to the Statement of Profit and Loss in a sequence:
(A) Profit before extraordinary items and tax
(B) Profit before tax
(C) Cost of materials consumed
(D) Revenue from operations
Choose the correct answer from the options given below:

• A. (A), (B), (C), (D)
• B. (B), (A), (C), (D)
• C. (C), (D), (A), (B)
• D. (D), (C), (A), (B)

Hint:

Follow the format of the Statement of Profit and Loss: revenue, then expenses, then profit before extraordinary items and tax, then profit before tax.

Answer 1

The Correct Option is D

Step 1: Understanding the Question:
The Statement of Profit and Loss follows a fixed format. It starts with income, then deducts expenses step by step to reach profit.

Step 2: First line:
The statement starts with Revenue from operations (D). Other income is added to it to get total revenue.

Step 3: Expenses:
Next come the expenses. The first expense is Cost of materials consumed (C). Purchases of stock in trade, employee benefits, finance cost and depreciation follow it.

Step 4: Profit lines:
Total revenue minus total expenses gives Profit before extraordinary items and tax (A). Extraordinary items are then adjusted to get Profit before tax (B).

Step 5: Check the options:
The order is D, C, A, B. Option 1 puts profit first, which is wrong. Option 2 puts profit before tax first, wrong. Option 3 puts the expense before revenue, wrong. Option 4 matches the format.

Final Answer:
The sequence is (D), (C), (A), (B), which is option 4. \[\boxed{4}\]