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35 Sasha has prepared a draft statement of profit or loss for her business:
$ $
Sales 256,800
Cost of sales
Opening inventory 13,400
Purchases 145,000
Closing inventory 14,200
(144,200)
Gross profit 112,600
Expenses (76,000)
Net profit 36,600Sasha has not yet recorded the following items:
• Carriage in of $2,300
• Discounts received of $3,900
• Discounts allowed of $1,950
After these amounts are recorded, what are the revised values for gross and net profit of Sasha’s business?
Gross profit Net profit
$ $
A 108,350 36,250
B 108,350 28,450
C 110,300 28,450
D 110,300 36,250Dear sir,
i understand how to get the gross profit, but i could not get the net profit as i did
expenses – 76,000 + 2300 + 1950. according to the book’s answer, to find the net profit, i need to minus disc. allowed and add disc. received.
why do i need to add discount received to expense? also sir, isnt carriage inwards an expense? why didnt the book add that to the expense?
thank you, sir.
We do not add discount received to expenses, and I am sure that the answer in your book has not done that either.
You are not asked to calculate the correct figure for expenses – you are asked for the correct figure for the profit. If there is discount received then it does reduce the expenses and therefore increases the profit.Similarly discounts allowed and carriage inwards both reduce the profit (and carriage inwards also reduces the gross profit because it increases the cost of goods sold)
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