Question

Calculate the amount of gross profit, operating profit and net profit on the basis of the following balances extracted from the books of M/s Rajiv & 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

Financial Statement of M/s Rajiv & Sons
Trading Account for the year ended March 31, 2017
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Opening Stock		50,000	Net Sales	11,00,000
Net Purchases		6,00,000	Closing Stock	70,000
Direct Expenses		60,000
Gross Profit (Balancing Figure)		4,60,000
		11,70,000		11,70,000

Profit and Loss Account for the year ended March 31, 2017
Dr.					Cr.
Particulars		Amount (Rs)	Particulars	Amount (Rs)
Administration Expenses		45,000	Gross Profit	4,60,000
Selling & Distribution Expenses		65,000
Loss by Fire		20,000
Net Profit		3,30,000
		4,60,000		4,60,000

Working Notes:

$\begin{array}{l}\text{Operating Profit = Net Profit}-\text{Non-Operating Income + Non-Operating Expenses}\\ \text{= 3,30,000}-\text{0 + 20,000}\\ \text{= Rs 3,50,000}\end{array}$
Loss by Fire is a non-operating expense, thus, added to the net profit to arrive at operating profit.