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CBSE Class 11-commerce Answered

A Gross Profit Rs 15,000, Carriage Inwards Rs 4,000, Rent Rs 4,500, Drawings Rs 6,000, Freight Outward Rs 5,000, Repairs & Maintenance Rs 4,800, Manufacturing Wages Rs 5,000, Bad Debts Recovered Rs 3,000. What is the amount of net profit/loss?

Asked by avanigupta2019 | 05 Feb, 2020, 11:51: PM

Expert Answer

A Profit and Loss Account determines the net profit earned or loss incurred by the business during an accounting period. It starts with the Gross Profit or Gross Loss that is computed by balancing the Trading Account.
All the indirect incomes and gains are credited to the Profit and Loss Account and all the indirect expenses and losses are debited to the Profit and Loss Account. Difference between the debit and credit side determines the Net Profit or Net Loss.
Therefore, from the details given,

Net Profit/Loss = Gross Profit - (All Indirect Expenses & Losses) + (All Indirect Incomes & Gains)

Net Profit/Loss = 15,000 - [4500 (Rent)+5000 (Freight Outward)+4,800 (Repairs)] + [3,000 (Bad debts Recovered)]

Net Profit = 3,700

Note: Carriage Inwards, Drawings and Manufacturing Wages are not classified as indirect expenses and therefore, not considered while computing Net Profit/Loss.

Answered by Surabhi Gawade | 06 Feb, 2020, 09:30: AM

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