Bisi Traders reported a Gross Profit of \text{N}90,000 and discounts received of \text{N}5… — JAMB UTME

Bisi Traders reported a Gross Profit of $\text{N}90,000$ and discounts received of $\text{N}5,000$ for the year ended 31st December 2025. Total operating expenses paid during the year amounted to $\text{N}30,000$ , which included $\text{N}4,000$ rent prepaid for the next accounting period. What is the net profit of Bisi Traders for the year?

$\text{N}69,000$ Answer
B
$\text{N}65,000$
C
$\text{N}61,000$
D
$\text{N}59,000$

Answer

The net profit of Bisi Traders for the year is

\text{N}69,000

To determine the net profit, operating expenses must first be adjusted for prepayments:

\text{N}30,000 - \text{N}4,000 = \text{N}26,000

. Adding discounts received (

\text{N}5,000

) to Gross Profit (

\text{N}90,000

) gives total income of

\text{N}95,000

. Subtracting adjusted expenses yields

\text{N}95,000 - \text{N}26,000 = \text{N}69,000

Step-by-Step Solution

Calculate the adjusted operating expenses for the period

\text{Adjusted Expenses} = \text{N}30,000 - \text{N}4,000 = \text{N}26,000

Prepaid expenses relate to the next accounting period and must be deducted from expenses paid during the current period under the matching concept.

Determine total income by adding discounts received to gross profit

\text{Total Income} = \text{N}90,000 + \text{N}5,000 = \text{N}95,000

Discounts received are revenue items credited to the profit and loss account.

Calculate Net Profit

\text{Net Profit} = \text{Total Income} - \text{Adjusted Expenses} = \text{N}95,000 - \text{N}26,000 = \text{N}69,000

Net profit is the excess of total revenue over total operating expenses.

Key Concept

Profit and Loss Account and Net Profit Determination

Estimated Time:1m 0s

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