Prepare a trading and profit and loss account for the year ending 31-Dec-2014 from the following information.

Steps to Solve

1. Calculate Net Sales To find the net sales, subtract sales returns from total sales.

   $$ \text{Net Sales} = \text{Sales} - \text{Sales Returns} $$ $$ \text{Net Sales} = 40,000 - 2,000 = 38,000 $$

2. Calculate Total Purchases Total purchases are calculated by taking the total purchases and subtracting purchase returns. Then add carriage on purchases.

   $$ \text{Total Purchases} = \text{Purchases} - \text{Purchase Returns} + \text{Carriage on Purchases} $$ $$ \text{Total Purchases} = 23,000 - 3,000 + 1,500 = 21,500 $$

3. Calculate Cost of Goods Sold (COGS) COGS is determined by adding the opening stock to total purchases and then subtracting the closing stock.

   $$ \text{COGS} = \text{Opening Stock} + \text{Total Purchases} - \text{Closing Stock} $$ $$ \text{COGS} = 7,000 + 21,500 - 12,500 = 16,000 $$

4. Calculate Gross Profit Gross profit is calculated by subtracting COGS from net sales.

   $$ \text{Gross Profit} = \text{Net Sales} - \text{COGS} $$ $$ \text{Gross Profit} = 38,000 - 16,000 = 22,000 $$

5. Calculate Total Operating Expenses Total operating expenses include salaries, productive wages, rent, advertisement, audit fee, and carriage on sales.

   $$ \text{Total Expenses} = \text{Salaries} + \text{Productive Wages} + \text{Rent} + \text{Advertisement} + \text{Audit Fee} + \text{Carriage on Sales} $$ $$ \text{Total Expenses} = 3,800 + 3,100 + 1,400 + 800 + 300 + 500 = 10,900 $$

6. Calculate Net Profit Finally, subtract total operating expenses from gross profit to find net profit.

   $$ \text{Net Profit} = \text{Gross Profit} - \text{Total Expenses} $$ $$ \text{Net Profit} = 22,000 - 10,900 = 11,100 $$