State True or False :
(i) Gross profit is total revenue.
(ii) In trading and profit and loss account, opening stock appears on the debit side
because it forms the part of the cost of sales for the current accounting year.
(iii) Rent, rates and taxes is an example of direct expenses.
(iv) If the total of the credit side of the profit and loss account is more than the
total of the debit side, the difference is the net profit.
Answers
1. False
2. True
3. False
4. True
Explanation:
1. The statement is false as the gross profit is computed by deducting the COGS (Cost of goods sold) from the revenue which is sales.
2. The statement is true as the opening stock is shown or stated on the debit side of the P&L A/c as it is part of sales for the year.
3. The statement is false as the direct expense are those expense which is incurred or occurred and it varies straight away with the changes in volume. Example are commission and payroll taxes.
4. The statement is true as the net income is the determination of the profitability of the entity business or venture. And if the credit side is more than the debit side of P&L it will be a net profit for the business.
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