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 & Sons for the year ended 31st March, 2016

$\begin{array}{cc}& \text{Amt (Rs.)}\\ \text{Opening stock}& 50,000\\ \text{Net sales}& 11,00,000\\ \text{Net purchases}& 6,00,000\\ \text{Direct expenses}& 60,000\\ \text{Administration expenses}& 45,000\\ \text{Selling and distribution expenses}& 65,000\\ \text{Loss due to fire}& 20,000\\ \text{Closing stock}& 70,000\end{array}$

Answer 1

Trading Account
$\begin{array}{cccccccc}\text{Dr.}& & & & & & & \text{Cr.}\end{array}$
$\begin{array}{cccc}\text{Particulars}& \text{Amt. (Rs.)}& \text{Particulars}& \text{Amt. (Rs.)}\\ \text{Opening Stock}& 50,000& \text{Sales}& 11,00,000\\ \text{Purchases}& 6,00,000& \text{Closing Stock}& 70,000\\ \text{Direct Expenses}& 60,000& & \\ \text{Gross Profit c/d}& 4,60,000& & \\ & \underset{–}{\overline{11,70,000}}& & \underset{–}{\overline{11,70,000}}\end{array}$

Operating Profit
=Gross Profit - (Operating Expenses + Operating Income)
= Rs. 4,60,000 - (Rs. 1,10,000 + 0)
= Rs. 3,50,000.

Note:
(1) Loss due to fire is a non-operating expense.

(2) Operating Expenses = Administration Expenses + Selling and Distribution Expenses
= Rs. 45,000 + Rs. 65,000
= Rs. 1,10,000