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Question
State true or false with reason.
Gross Profit depends upon Net Sales.
Options
True
False
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Solution
Gross Profit depends upon Net Sales. - True
Explanation:
Gross profit is ascertained by preparing a Trading Account. In this account, all the direct costs incurred are deducted from the net sales (sales less sales return), i.e. revenue, to arrive at gross profit. Hence, it is correct to say that gross profit depends on net sales.
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| To Opening stock | 20,000 | By Sales | 1,20,000 |
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| To Carriage inward | 500 | ||
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| To Finance expenses | 3,000 | ||
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Cr. | |
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| To Opening stock | 50,000 | By Sales | 6,00,000 |
| To Purchases | 4,50,000 | By Closing Stock | 1,50,000 |
| To Carriage | 20,000 | ||
| To Direct expenses | 30,000 | ||
| To Wages | 50,000 | ||
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