Question

30. From the following information obtained from the books of Kamal Ltd.
Calculate (i) Gross Profit Ratio and (ii) Net Profit Ratio
Revenue from operations
Purchases
Carriage Inwards
Salaries
Decrease in inventory
Return Outwards
Wages
2.50,000
1,05,000
4,000
30.000
15,000
5,000
18.000​

Answer 1

The Gross Profit ration will be $42.04$%

The Net Profit Ratio will be $29.80$%.

Given: Details about the business of Kamal Ltd.

To find Gross Profit and Net Profit

Solution:

From the information that is provided to us, we have to differentiate between direct expenses and indirect expenditures.

This is required to be done to find out the total Gross Profit and Net profit that Kamal has earned.

For the gross profit calculation, we use the formula Sales - Return Outward - (Purchases - Returns - Direct expenses - Decrease in inventory).

$2,45,000$ - ($1,05,000$ - $4000$ - $15,000$ - $18,000$) = $1,03,000$

Gross Profit is $\frac{Gross Profit}{Net Sales}$ × $100$

Gross Profit Ratio = $\frac{103000}{245000}$ × $100$ = $42.04%$%

For net profit calculation, we subtract the indirect expenditure of salaries from the gross profit.

Net profit = $1,03,000 - 30,000 = 73,000$

Net Profit Ratio = $\frac{Net Profit}{Net Sales}$ × $100$

Net Profit Ratio = $\frac{73000}{245000}$ ×$100$ = $29.80%$%

Therefore, the Gross Profit Ratio will be $42.04$% and the Net Profit will be $29.80$%.

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Answer 2

The Gross Profit ration will be 42.04%

The Net Profit Ratio will be 29.80%.

We must distinguish between direct expenses and indirect expenditures based on the facts presented.

To determine Kamal's overall Gross Profit and Net Profit, this must be completed.

Gross Profit can be calculated by=

Sales - Return Outward - (Purchases - Returns - Direct expenses - Decrease in inventory).

2,45,000 - (1,05,000 - 4000 - 15,000 - 18,000)

= 1,03,000

Gross Profit Ratio = $\frac{Gross Profit}{Net sales}$ × 100

Gross Profit Ratio =  $\frac{103000}{245000}$ × 100

                               = 42.04%

To calculate net profit, we deduct salaries' indirect costs from gross profit.

Net Profit Ratio = $\frac{Net Profit}{Net sales}$× 100

Net Profit Ratio = $\frac{73000}{245000}$× 100

                          = 29.80%

Therefore, the Gross Profit Ratio will be 42.04% and the Net Profit will be 29.80%.

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