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Difficulty: EasyPreparation of Company Statement of Profit or Loss

Oceanic Commerce Plc earned a gross profit of ₦1,200,000 for the financial year ended 31 December 2025. During the year, the company incurred total administrative and distribution expenses of ₦450,000 and paid ₦50,000 as interest on debentures. Calculate the net profit before taxation for the year in Naira (₦).

Answer: 700000 ₦

Answer

The net profit before taxation for the year is ₦700,000.
Net profit before taxation is derived by taking the gross profit of ₦1,200,000 and deducting both operating expenses (₦450,000) and debenture interest (₦50,000), leaving a net profit before tax of ₦700,000.

Step-by-Step Solution

1
Calculate operating profit by deducting administrative and distribution expenses from gross profit.
₦1,200,000 - ₦450,000 = ₦750,000
Operating profit measures earnings from core operations before finance expenses.
2
Deduct debenture interest from operating profit to arrive at net profit before tax.
₦750,000 - ₦50,000 = ₦700,000
Debenture interest is a mandatory finance cost charged against profit in the Statement of Profit or Loss.

Key Concept

Net Profit Determination in Company Statement of Profit or Loss
Estimated Time:1m 0s
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Topics

Preparation of Company Statement of Profit or Loss

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