If the gross profit is N5000; what is the net profit?

A. ₦4,350
B. ₦6,000
C. ₦5,150
D. ₦4,000

Correct Answer:

Option C – ₦5,150

Explanation

If the gross profit is ₦5,000, then the net profit is calculated below;
The item that will appear in the profit and loss account are;

Bad debt written off ₦350, Discount allowed ₦500 and Discount received ₦1,000

Net profit is the profit made after all the expenses incurred are deducted from the gross profit
₦5150 is the net profit calculated i.e bad debt 350 &nplus; discount allowed 500 &nplus; net profit 5,150 less gross profit 5,000 + discount received 1,000