Which of the following equations is correct?
Correct answer: C. Gross Profit + Opening Stock + Direct expenses + Purchases- Closing stock = Sales
- A. Gross Profit+ Sales+ Direct expenses+ Purchases+ Closing stock = Opening stock
- B. Gross Profit+ Sales+ Direct expenses+ Purchases- Closing stock = Opening Stock
- C. Gross Profit + Opening Stock + Direct expenses + Purchases- Closing stock = Sales
- D. Gross Profit - Opening Stock + Direct expenses + Purchases +Closing stock = Sales
Explanation
From the trading equation, Sales = Opening Stock + Purchases + Direct Expenses - Closing Stock + Gross Profit. Rearranging gives Gross Profit + Opening Stock + Direct Expenses + Purchases - Closing Stock = Sales.
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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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