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CSEET · Fundamentals of Accounting · Preparation of Final Accounts for Sole Proprietorship

Gross profit of Ramesh Traders is Rs 1,50,000. Indirect expenses are: salaries Rs 40,000, rent Rs 20,000, and discount allowed Rs 5,000. Commission received is Rs 12,000 and interest on investments is Rs 8,000. What is the net profit?

Net profit is Rs 1,05,000. Add the gross profit of Rs 1,50,000 to other incomes of Rs 20,000, then deduct total indirect expenses of Rs 65,000. Ignoring the commission and interest incomes would wrongly give Rs 85,000.

  1. ARs 1,05,000Correct
  2. BRs 85,000
  3. CRs 1,25,000
  4. DRs 1,00,000

Explanation

Expenses = 40,000+20,000+5,000 = 65,000. Incomes = 12,000+8,000 = 20,000. Net profit = 1,50,000 + 20,000 - 65,000 = 1,05,000. Rs 85,000 results from ignoring the incomes.

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