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

	N
Debtors opening	4000
Debtors closing	1500
Cash received from debtors	8500
Bad debts written off	350
Discount allowed	500
Discount received	1000

 

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

Gross Profit	5000
Discount Received	1000	6000
Expenses
Bad debt.	350
Discout Allowed	500	850
Net profit		5,150

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