CA FOUNDATION: ACCOUNTING · FINAL ACCOUNTS OF SOLE PROPRIETORS

Trading account: gross profit

GP = Net sales − Cost of goods sold; COGS = Opening stock + Net purchases + Direct expenses − Closing stock. Carriage outwards and salaries are indirect (P&L).

Loading practice…

Worked examples

Example 1 · level 1

From the following balances of Patel Brothers for the year ended 31 March, find the gross profit: Purchases ₹4,55,000; Opening stock ₹80,000; Wages ₹15,000; Sales ₹6,89,000; Closing stock ₹48,000.

Show solution

Net sales = ₹6,89,000.
COGS = ₹80,000 + ₹4,55,000 + ₹15,000 − ₹48,000 = ₹5,02,000.
GP = ₹6,89,000 − ₹5,02,000 = ₹1,87,000.

Answer: ₹1,87,000

Example 2 · level 2

From the following balances of Nair Spices for the year ended 31 March, find the gross profit: Opening stock ₹68,000; Closing stock ₹33,000; Carriage inwards ₹13,000; Purchases returns ₹5,000; Sales ₹5,84,000; Purchases ₹4,09,000; Wages ₹33,000; Sales returns ₹8,000.

Show solution

Net sales = ₹5,84,000 − ₹8,000 = ₹5,76,000.
COGS = ₹68,000 + ₹4,09,000 − ₹5,000 + ₹33,000 + ₹13,000 − ₹33,000 = ₹4,85,000.
GP = ₹5,76,000 − ₹4,85,000 = ₹91,000.

Answer: ₹91,000

Example 3 · level 3

From the following balances of Patel Brothers for the year ended 31 March, find the gross profit: Sales ₹4,72,000; Purchases returns ₹6,000; Salaries ₹44,000; Purchases ₹2,37,000; Opening stock ₹25,000; Sales returns ₹6,000; Wages ₹17,000; Carriage inwards ₹12,000; Closing stock ₹53,000; Carriage outwards ₹7,000.

Show solution

Net sales = ₹4,72,000 − ₹6,000 = ₹4,66,000.
COGS = ₹25,000 + ₹2,37,000 − ₹6,000 + ₹17,000 + ₹12,000 − ₹53,000 = ₹2,32,000.
GP = ₹4,66,000 − ₹2,32,000 = ₹2,34,000.

Answer: ₹2,34,000