M21EKM.

Tutorial: Profit and Loss Account

Question1
Which of the following is true:
1

If sales are 200 000, purchases are 140 000, opening stock is 0 and
closing stock is 20 000 what is the Gross Profit?
a
20 000
b
40 000
c
60 000
d
80 000

If purchases are 60 000, opening stock is 10 000 and closing stock is

5 000, what is the cogs (cost of goods sold)?
a
55 000
b
65 000
c
75 000
d
85 000

If cogs are 80 000 and gross profit is 120 000, what are the value of
sales?
a
40 000
b
80 000
c
120 000
d
200 000

If sales are 175 000, opening stock is 15 000, closing stock is 10

000, gross profit is 105 000, what is the value of the purchases?
a
80 000
b
65 000
c
70 000
d
75 000

If purchases are 78 000, closing stock is 5 000, opening stock was 4

000, what is the cogs?
A
77 000
B
82 000
C
78 000
D
87 000

If sales are 50 000, opening stock is 10 000, purchases are 52 000

and gross profit is 10 000, what is the closing stock?
a
12 000
b
62 000
c
40 000
d
22 000

M21EKM.

Question 2
1

Profit is calculated by:

Comparing assets with
a liabilities
b Comparing assets with expenses
c Comparing income and expenses
d Comparing income with liabilities

The profit and loss account of a partnership which manufacturers the goods it sells will include:
a Manufacturing, trading, profit and loss, and appropriation accounts
b As (a) but without the appropriation account
c As (a) but with a partnership account
d Only the trading account

For a soft drinks factory, direct costs could include:

a The cost of machinery used to liquidise oranges
b Depreciation of a bottle washing machine
c Factory rent
d Flavourings

Which of the following headings does not appear in a manufacturing account

a Prime cost of trading
b Total factory production cost
c Raw materials
Indirect factory
d costs

A company has opening stock 3 900, closing stock 2 800, purchases 18 650,
carriage inwards 850 and purchases returns 1 600. What is its cost of goods sold?
a 22 200
b 12 200
c 19 000
d 17 300

In a manufacturing company which also buys completed goods for resale, 'cost of goods
sold' is found by the formula
a Opening stock of raw materials + Purchases + Factory production costs - Closing stock
of raw materials
Opening stock of finished goods + Purchases + Factory production costs - Closing
b stock
of finished goods
c Opening stock of finished goods + Purchases - Factory production costs - Closing stock
of finished goods
d Opening stock of finished goods + Purchases + Factory production costs + Closing stock
of finished goods

Which of these is not an expense

a Carriage inwards
b Carriage outwards
c Discount allowed
d Discount received

M21EKM.
Question 3
Create a Profit and Loss Account for a business called Chocolate Cakes Ltd, using
the information below for the year ended 31 December 2003.
Opening Stock
Rates
Advertising
Vehicle expenses
Taxation
Interest paid
Depreciation
Wages
Closing Stock
Purchases
Dividends
Other expenses
Sales revenue

65 000
80 000
120 000
210 000
140 000
45 000
60,000
600,000
90,000
1 100,000
45,000
41,000
2 800,000

Hint:
a. First calculate cost of goods sold.
b. Then calculate gross profit.
c. Add up all expenses
d. Subtract expenses from gross profit.
e. Calculate net profit.
Chocolate Cakes Ltd
Profit and Loss Account for the year ended 31 December 2003.

Sales
Opening Stock
Add Purchase
Less Closing Stock
Cost of Goods Sold
Gross profit
Less Expenses
Vehicle Expenses
Interest Paid
Depreciation
Other expenses
Wages
Rates
Advertising
Net Profit

2 800 000

65 000
1 100 000
90 000
1 075 000
1 725 000
210 000
45 000
60 000
41 000
600 000
80 000
120 000

1156 000
569 000

M21EKM.

Question 4
From the following information, prepare suitable profit and loss accounts for each organisation.
Name:
Type of business:
Year
ended:
Sales
Closing stock:
Finished goods
Raw materials
Work-in-progress
Purchases (finished goods)
Carriage inwards
Sales
returns
Discount allowed
Carriage outwards
Purchases returns
Raw materials purchased
Opening stock:
Finished goods
Raw materials
Work-in-progress
Fees from clients
Factory indirect expenses
General office
expenses
Depreciation: factory
Depreciation: office
Discount received
Production labour

Amber
Manufacture
r

Blue

Cerise
Service Provider

30-Apr-05

253 620

Trader
31-May05

184 162

13 671
9 641
32 040
-

10 700
65 210
360

840
52 450

580
320
240
2 600
-

160
-

12 634
8 320
35 620
89 322

12 700
-

85 400
-

34 600
6 000
3 600
114
47 653

54 923
2 300
120
-

21 500
1600
-

30-Jun-05

M21EKM.

Question 4a
Amber: Profit and loss account for the year ended 30 April 2005

Raw materials
Opening stock at 1 May 2004
Add Raw materials purchased
Less Closing stock at 30 April 2005
Cost of raw materials
Other direct costs:
Production labour
Prime cost of production
Indirect factory costs:
Factory expenses
Depreciation: factory

8 320
52 450
60 770
(9 641)
51 129

47 653
98 782
89 322
6 000
95 322
194 104

Add Opening Work-in-progress

Less Closing Work-in-progress

35 620
(32 040)
3 580
197 684

Total factory production cost c/d

Sales
Less Cost of goods sold
Opening Stock at 1 May 2004
Add Total factory production cost b/d
Less Closing stock at 30 April 2005

253 620
12 634
197 684
210 318
(13 671)
(196647)
56 973

Gross Profit
Add Discount received
Less Expenses
Office expenses
Discount allowed
Depreciation: office
Net Profit

Question4b

114
57 087
34 600
840
3 600
(39 040)
18 047

M21EKM.
Blue: Profit and loss account for the year ended 31 May 2005

Sales
Less Sales returns

184 162
580
183 582

Less Cost of goods sold

Opening Stock at 1 June 2004
Add Purchases
Carriage inwards
Less Purchases returns

Less Closing Stock at 31 May 2005

12 700
65 210
360
65 570
2600
62 970
75 670
10 700
64 970
118 612
120
118 732

Gross Profit
Add Discount received
Less Expenses
General office expenses
Carriage outwards
Depreciation: office
Discount allowed
Net Profit

Question4c

54 923
240
2 300
320
57 783
60 949

M21EKM.
Cerise: Profit and loss account for the year ended 31 May 2005

Fees from clients

Less Expenses
General office expenses
Discount allowed
Depreciation: office
Net profit

85 400

21 500
160
1 600
23 260
62 140