Profit Notes

Concept Notes:
A person engages in business primarily for profit or return on investments, PROFIT

is the difference between the amounts invested the monetary gain from the
investment. On the other hand, Profit, also called net income, it is the amount of
earnings that exceed expenses for the period, in other words, it is the amount of
income left over after all the necessary and matched expenses are subtracted for the
period.
To determine profit are as follows:

a. Gross means the total or amount without any deductions
b. Net is the remaining amount after deductions
c. Gross Sales indicates the amount received for goods sold
d. Net Sales are obtained when refunds are deducted from the gross sales
Formulas:
Gross Profit = Net Sales – Cost of Goods
Net Sales = Gross Sales – Refund and Allowances
Net Profit = Gross Profit – Operating Expenses
Moreover, an expense is the cost of operations that a company incurs to generate

revenue. As the popular saying goes, “it costs money to make money. Common
expenses include payments to suppliers, employee wages, factory leases, and
equipment depreciation. Businesses are allowed to write off tax-deductible expenses
on their income tax returns to lower their taxable income and thus their tax liability.
However, the Internal Revenue Service (IRS) has strict rules on which expenses
business are allowed to claim as a deduction.
Formulas:
Available Goods = Beginning Inventory + Purchases
Cost of Goods Sold = Available Goods + Ending Inventory
Exercise/Practice/Drill
A. Write P if the statement describes profit and E if it is an expense.

_____1. After deducting operating expenses from gross profit is net profit.
_____2. Company A is paying monthly bills for telephone and postages.
_____3. Net Sales are obtained when refunds are deducted from the gross sales.
B. Match column A with column B and write the letter on the blank provided.
A B
_____1. Available Goods + Ending Inventory a. Gross Profit
_____2. Gross Sales – Refund and Allowances b. Cost of Goods Sold
_____3. Net Sales – Cost of Goods c. Net Sales
Concept Notes:
Formulas in obtaining the profit are as follows:

Gross Profit = Net Sales – Cost of Goods
Net Sales = Gross Sales – Refund and Allowances
Net Profit = Gross Profit – Operating Expenses
For example:
The total sales of Kristen Angel Department Store during the month of
December were ₱5,976.12. The cost of goods during the month was ₱2,324,080.25.
The expenses were as follows: salaries and wages ₱170,910.83; rent P350,000.00;
light and water bills ₱418,265.34; miscellaneous expenses ₱120,450.25; and some of
the merchandize amounted to ₱1,480.980.
Find the (a) gross profit (b) operating expenses, and (c) net profit for the month
of December.
Solution:
Gross Sales ₱5,976, 418.12
Less: Sales Returns ₱1,480,980.00
Net Sales ₱4,495,438.00
Less: Cost of goods sold ₱2,324,080.25
Gross Profit ₱2,171,357.87 (a)
Less: Operating Expenses
Salaries and wages ₱170,910.83
Rent ₱350,000.00
Light and wages ₱418,265.34
Miscellaneous expense ₱120,450.25
Total expense ₱1,059,626.42 (b)
Net Profit ₱1,111,731.45 (c)
Concept Notes:
Formulas in obtaining the operating or expenses overhead are as follows:
Available Goods = Beginning Inventory + Purchases

Cost of Goods Sold = Available Goods + Ending Inventory
Example:
On May 1, the merchandize inventory of Kesten Tires and Battery Supply was
₱165,256.13 and its purchase after that date amounted to ₱110,901.45. On July 31,
the store inventory was ₱98,542.63. How much goods were sold?
Solution:
Beginning Inventory ₱165,256.13
Add Purchase ₱110,901.45
Goods for Sale ₱276,157.58
Less Ending Inventory 98,542.63
Cost of Goods Sold ₱177,614.95
Exercise/Practice/Drill
A. Solve the following problem.
On February 1, Grace Florida’s merchandize inventory was ₱7,463.35. During

the month she purchased additional goods amounting to ₱4,563.15. On March
31, her inventory was ₱6,782.95. What was the cost of goods sold?

Profit Notes

Uploaded by

Copyright:

Available Formats

Profit Notes

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Profit Notes

Uploaded by

Copyright:

Available Formats

Concept Notes:

A person engages in business primarily for profit or return on investments, PROFIT

To determine profit are as follows:

Moreover, an expense is the cost of operations that a company incurs to generate

A. Write P if the statement describes profit and E if it is an expense.

Formulas in obtaining the profit are as follows:

Formulas in obtaining the operating or expenses overhead are as follows:

Available Goods = Beginning Inventory + Purchases

A. Solve the following problem.

On February 1, Grace Florida’s merchandize inventory was ₱7,463.35. During

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.