Question
The following information relates to the activities of Inga Candels for the year ended 31 Oct 2022: & multicolumn(1)(|c|)( boldsymbol(E) ) Gross profit & 15,000 Motor vehicle & 2,000 expense & Rent expense & 4,000 Light and Heat & 1,000 Salaries & 3,000 Interest on loan & 1,000 Trade receivable & 500 What is the entity's Net Profit for the period? £ 4,000 £ 5,000 £ 6,000 £ 4,500
Answer
4.4
(160 Votes)
Harry
Professional · Tutor for 6 years
Answer
For the final answer, put the given figures from the statement into the formula as follows,Net Profit = Substituting these values we get;Net Profit = £15,000 - (£2,000 + £4,000+ £1,000 + £3,000 + £1,000)Net Profit = £15,000 - £11,000Net Profit = So the Net profit of Inga Candels for the year that ended on October 31, most likely to be £4,000.
Explanation
## Step 1:Identify the profit and expense items to calculate Net Profit.Looking over the given table we can spot the following: Gross Profit which is our income therefore added to the profit. Motor Vehicle Expenses, Rent, Light and Heat Expenses, Salaries and Interest on Loan are all expenses therefore detracted from the Gross Profit to achieve Net Profit. ‘Trade Receivable’ is an item that indicates the amount of money owed to a business by its customers, therefore, it's a Balance Sheet item and is not considered in the calculation of the revenue.## Step 2:To calculate the Net Profit we subtract all the expenses from the Gross Profit to get our answer.Based on the items identified above, subtract all expense items from the profit items to find the Net Profit.### Formula: ### **Net Profit = Gross Profit - (Motor Vehicle Expense + Rent Expense + Light and heat expense + Salaries La + Interest on loan)**## Step 3:Perform the calculation.