The following summary of financial information was extracted from the accounting records of Highgrade Manufacturing Company for the year ended 31st December 2025:
| Financial Item | Amount (₦) |
|---|---|
| Sales Revenue | 520,000 |
| Opening Stock of Finished Goods | 60,000 |
| Cost of Finished Goods Produced | 310,000 |
| Closing Stock of Finished Goods | 50,000 |
| Carriage Outwards | 15,000 |
| Administrative Expenses (including ₦5,000 prepaid) | 35,000 |
| Selling Expenses (excluding ₦8,000 accrued) | 22,000 |
Based on the information above, complete the missing financial figures for the Trading and Profit & Loss Account.
Answer:The Gross Profit reported in the Trading Account is ₦【200,000】, while the Net Profit reported in the Profit & Loss Account is ₦【125,000】.
Answer
The Gross Profit is ₦200,000 and the Net Profit is ₦125,000.
To calculate the Gross Profit, opening stock of finished goods (₦60,000) is added to the cost of finished goods produced (₦310,000) minus closing stock of finished goods (₦50,000) to arrive at a Cost of Goods Sold of ₦320,000. Subtracting this from Sales Revenue (₦520,000) gives a Gross Profit of ₦200,000. For Net Profit, operating expenses are adjusted for prepayments and accruals: Administrative Expenses (₦35,000 - ₦5,000 = ₦30,000), Selling Expenses (₦22,000 + ₦8,000 = ₦30,000), and Carriage Outwards (₦15,000). Total operating expenses of ₦75,000 subtracted from ₦200,000 Gross Profit yields a Net Profit of ₦125,000.
Step-by-Step Solution
Key Concept
Preparation of Trading and Profit & Loss Account for Manufacturing Entities
Estimated Time:2m 0s