Question

Choose the correct chronological order of ascertainment of the following profits from the profit and loss account.

• A. Operating Profit, Net Profit, Gross Profit
• B. Operating Profit, Gross Profit, Net Profit
• C. Gross Profit, Operating Profit, Net Profit
• D. Gross Profit, Net Profit, Operating Profit

Answer 1

Answer: (C)

Gross Profit, Operating Profit, Net Profit

At the end of the financial year, books of the business are closed and financial statements are prepared to know the profitability of the organization.

Following is the sequence of knowing the profitability:

• Gross Profit by preparing the trading account
  
• Operating Profit by deducting the operating expenses from gross profit.
• Net Profit after deducing the non operating expenses from operating profit and adding the non operating income.