Question

Calculate the amount of gross profit and operating profit on the basis of the following balances extracted from the books of M/s Rajiv and Sons for the year ended March 31, 2017.

	₹
Opening stock	50,000
Net sales	11,00,000
Net purchases	6,00,000
Direct expenses	60,000
Administration expenses	45,000
Selling and distribution expenses	65,000
Loss due to fire	20,000
Closing stock	70,000

Answer 1

Dr.	Trading Account as of March 31, 2017		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
Opening Stock	50,000	Net Sales	11,00,000
Net Purchases	6,00,000	Closing Stock	70,000
Direct Expenses	60,000
Gross Profit	4,60,000
	11,70,000		11,70,000

Operating Profit = Net profit + Non operating expenses – Non operating incomes

Operating Profit = Sales – (Opening Stock + Net Purchases + Direct Expenses + Administration Expenses + Selling and Distribution Expenses) + Closing Stock

= 11,00,000 – (50,000 + 6,00,000 + 60,000 + 45,000 + 65,000) + 70,000

= 11,00,00 – 8,20,000 + 70,000

= ₹ 3,50,000