Gross Profit is equal to_________?
Correct answer: A. Sales - Cost of goods sold
- A. Sales - Cost of goods sold
- B. Sales - Closing Stock + Purchases
- C. Opening Stock + Purchases - Closing Stock
- D. None of the above
Explanation
Gross profit is the excess of sales over the cost of goods sold. Therefore, Gross Profit = Sales - Cost of Goods Sold; the other formula involving stock and purchases omits opening stock.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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