A sole trader who does not maintain complete double-entry records provides the following information for the financial year ended 31 December 2025:
| Account Details | Amount () |
|---|---|
| Cash paid to suppliers | |
| Opening trade creditors | |
| Closing trade creditors | |
| Discount received from suppliers | |
| Opening inventory | |
| Closing inventory |
If the business sells goods at a mark-up of on cost, what is the Gross Profit for the year?
- A₦3,200
- B₦3,750
- ₦4,000Answer
- D₦5,000
Answer
The Gross Profit for the year is ₦4,000.
To find Gross Profit from incomplete records, total credit purchases must first be determined using the creditors control account: Purchases = Cash Paid (₦16,800) + Discount Received (₦500) + Closing Creditors (₦3,700) - Opening Creditors (₦3,000) = ₦18,000. Next, Cost of Goods Sold (COGS) is computed: COGS = Opening Inventory (₦5,000) + Purchases (₦18,000) - Closing Inventory (₦7,000) = ₦16,000. Finally, applying the 25% mark-up on cost gives Gross Profit = 25% of ₦16,000 = ₦4,000.
Step-by-Step Solution
Key Concept
Calculation of Gross Profit from Incomplete Records via Creditors Control Account and Mark-up