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Calculation of Profit or % Profit for sole trader business!

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Calculation of Profit or % Profit for sole trader business!

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • September 2, 2018 at 9:51 am #470778
    sandhyabarbie6
    Member
    • Topics: 4
    • Replies: 4
    • ☆

    Hello Sir! Hope you’re doing great..

    I just needed help with the calculation of profit for a sole trader business.

    Normally, we calculate profit as : 1) Sales – Cost of Sales = Gross Profit

    OR:-

    2) Net Profit = Closing net assets + Drawings – Capital Introduced – Opening net assets

    & besides, we also have, Gross margins(profit as a % of sales) and Mark-ups (profit as a % of cost) crucial formula for profit calculation.

    MY QUESTION/CONFUSION IS:
    1) I am a sole trader. I sell soft drinks, boiled or fried noodles, chocolates, juice, cakes, pizza, burger breads and so on.
    2) In the morning, my opening balance is: 500$ Cash in hand
    3) In the evening, during closure of my business, Closing balance is 3000$
    4) Thus, my profit total is: 2500$ and I can easily calculate my percentage margin & mark ups also(whole total %)

    5) BUT, if a customer purchases: pizza, soft drink and a chocolate from my business.
    Obviously, I will calculate the whole total amount to be paid using a calculator or whatever software installed on my system/computer… & I can also calculate my whole profit.

    Is it possible, to calculate the PROFIT OR % PROFIT I MADE ON EACH ITEM SOLD, SEPARATELY? what I mean to say, is that, Can I calculate profit or % profit I made on pizza, soft drink & chocolate, separately, on each one of the item? (how much profit I made on pizza then soft drink then chocolate)

    Is there a way out to do so? A formula?

    Please bear with me, Sir. Thank you very much.. 🙂

    Your help is strongly appreciated..

    September 2, 2018 at 10:59 am #470800
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54679
    • ☆☆☆☆☆

    Firstly the total profit in your example would not be $2,500 !! The profit would depend on what inventories you had at the start and end of the day, and how mush they cost.

    With regard to calculating the profit on each item sold, the profit is the difference between the sale price and the cost – you would need to keep records for each item of what they cost and what you sold them for. (Which would be a lot of work – in real life you would more likely do it in total for each of the products rather than for each one separately).

    However, this is completely irrelevant for Paper F3 and could not be asked in the exam.

    My lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.

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  • The topic ‘Calculation of Profit or % Profit for sole trader business!’ is closed to new replies.

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