17.3.3. Key Concepts

Try these first

1. 1.

   What is the purpose of a trading account?

   Hint

   Think about how businesses evaluate their primary sales performance.

2. 2.

   Define net profit.

   Hint

   It’s the bottom line on the profit and loss account.

3. 3.

   What is the primary purpose of the trading account?

   • Calculate net profit
   • Calculate gross profit
   • List assets and liabilities

   Hint

   Think about which account relates directly to sales performance.

4. 4.

   True or False: The balance sheet shows the net profit of a business.

   • True
   • False

   Hint

   Consider what a balance sheet represents.

5. 5.

   A company starts with a cash sales revenue of ₹150,000, and its opening stock is ₹20,000. They make purchases totaling ₹70,000 and have closing stock of ₹30,000. Calculate the gross profit.

   Hint

   Use the gross profit formula and substitute the values.

6. 6.

   If a business records indirect expenses totaling ₹18,000 and finds a gross profit of ₹45,000, what will be the net profit for the business?

   Hint

   Directly subtract indirect expenses from gross profit.