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A sole trader business has reported the following financial data for the period ended 31 Jan 2022: & multicolumn(1)(|c|)( E ) Gross profit & 16,000 Motor vehicle expense & 1,000 Rent expense & 3,000 Salaries & 4,000 Insurance & 2,000 Interest expense & 1,000 Fixtures and Fittings & 4,000 What is the entity's Net Profit for the period? E2.000 E10.000 69,000 E12.000 E4.000 E1.000 E6.000 E5.000

Question

A sole trader business has reported the following financial data for the period ended 31 Jan 2022:

 & multicolumn(1)(|c|)( E ) 
 Gross profit & 16,000 
 Motor vehicle expense & 1,000 
 Rent expense & 3,000 
 Salaries & 4,000 
 Insurance & 2,000 
 Interest expense & 1,000 
 Fixtures and Fittings & 4,000 


What is the entity's Net Profit for the period?
E2.000
E10.000
69,000
E12.000
E4.000
E1.000
E6.000
E5.000

A sole trader business has reported the following financial data for the period ended 31 Jan 2022: & multicolumn(1)(|c|)( E ) Gross profit & 16,000 Motor vehicle expense & 1,000 Rent expense & 3,000 Salaries & 4,000 Insurance & 2,000 Interest expense & 1,000 Fixtures and Fittings & 4,000 What is the entity's Net Profit for the period? E2.000 E10.000 69,000 E12.000 E4.000 E1.000 E6.000 E5.000

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CliveProfessional · Tutor for 6 years

Answer

£5,000

Explain

## Step 1:<br />Net profit can be calculated by subtracting all expenses from the Gross Profit. Here, the Gross Profit for the entity is given as \(£16,000\).<br /><br />## Step 2:<br />Next we identify the list of expenses which are: Motor vehicle expense, Rent expense, Salaries, Insurance, and Interest expense. Total them up to determine the overall expense for the period.<br /><br />### Calculation: \(£1,000 ( Motor Vehicle ) + £3,000 ( Rent ) + £4,000 ( Salaries ) + £2,000 ( Insurance ) + £1,000 ( Interest ) = £11,000 ( Total Expenses )\)<br /><br />## Step 3:<br />We check if there are any tangible assets like land, buildings and equipment in our list. Disregard any value linked to these tangible assets from our total expenses. Here we have 'Faxtures and Fittings' which considered as tangible assets. But please note, results can be different based on the regulatory approach to fixture and fittings expenses which can sometimes be added as a one-time infrastructural cost.<br /><br />Now, we subtract the total expenses estimated in the step above from the Gross Profit given to calculate Net Profit for the period.<br /><br />### Calculation: \(£16,000 ( Gross Profit ) - £11,000 ( Total Expenses ) = £5,000 ( Net Profit)\)
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