Utah Contractor Practice Exam

What is the main focus of a contractor's profit and loss statement?

1. Total assets

2. Revenue and expenses

3. Current liabilities

4. Accounts payable

The correct answer is: Revenue and expenses

The main focus of a contractor's profit and loss statement is revenue and expenses. This financial document provides a summary of the income generated from the contractor's business activities and the costs incurred to run the operation during a specific period. By analyzing revenue and expenses, contractors can determine their gross profit, operating profit, and net income, which are essential for assessing the overall financial health of the business. Understanding this statement helps contractors make informed decisions regarding budgeting, project planning, and financial management. It enables them to identify profitable areas of their business and recognize expenses that may need to be controlled or reduced. In contrast, total assets, current liabilities, and accounts payable are important components of a balance sheet rather than a profit and loss statement, which has a different focus on operational profitability.