Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 12 - No. 31)
What is the key difference between a trading and a service business in terms of their income statements?
Trading businesses have a revenue section, while service businesses have a cost of goods sold section.
Trading businesses report a cost of goods sold, while service businesses do not.
Service businesses calculate net profit, trading businesses do not.
Trading businesses include operating expenses, service businesses do not.
Explanation
Trading businesses report and calculate cost of goods sold (COGS) in their income statements, whereas service businesses do not.
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