Highland Social Club operates a bar to generate additional revenue for its social activities. For the financial year ended 31 December 2025, the following information was extracted from its records:
- Bar inventory on 1 January 2025: ₦45,000
- Bar inventory on 31 December 2025: ₦58,000
- Total cash paid to bar suppliers: ₦320,000
- Bar creditors on 1 January 2025: ₦28,000
- Bar creditors on 31 December 2025: ₦34,000
- Bar wages paid: ₦65,000
- Accrued bar wages as at 31 December 2025: ₦12,000
- Bar takings (sales): ₦540,000
Calculate the net profit from bar operations to be transferred to the Income and Expenditure Account for the year ended 31 December 2025.
Answer: 150000 ₦
Answer
The net profit from bar operations to be transferred to the Income and Expenditure Account is ₦150,000.
To find the net profit transferred to the Income and Expenditure account, first compute credit purchases as ₦320,000 + ₦34,000 - ₦28,000 = ₦326,000. Next, calculate the Cost of Bar Goods Sold as ₦45,000 + ₦326,000 - ₦58,000 = ₦313,000. Deducting COGS from total bar takings of ₦540,000 gives a bar gross profit of ₦227,000. Finally, deduct total bar wages of ₦77,000 (₦65,000 paid + ₦12,000 accrued) to obtain the net profit of ₦150,000.
Step-by-Step Solution
Key Concept
Bar Trading Account Net Profit Determination