Question

Rose Ltd was set up on 1 May 20X8 with opening capital of £1,000. During the month of May, it entered into the following transactions:

Purchases of goods for resale, on credit £12,100, Payments to credit suppliers £ 8,400, Sales on credit £16,200,Sales in cash £ 1,300, Receipts from credit customers £ 3,200, Non-current assets purchased for cash £ 1,500, Depreciation £ 100, Other expenses, all paid in cash £ 800
What is the net profit earned by Rose Ltd in the month of May 20X8?

Answer 1

To calculate the net profit for Rose Ltd for May 20X8, add up sales revenues (£17,500), subtract the sum of expenses (£13,000), to arrive at a net profit of £4,500.

Step-by-step explanation:

To calculate the net profit for Rose Ltd for the month of May 20X8, we need to sum up all revenues and subtract all expenses. Here's how we can calculate it:

• Total sales revenue: Sales on credit (£16,200) + Sales in cash (£1,300) = £17,500.
• Costs and Expenses: Purchases of goods (£12,100) + Other expenses (£800) + Depreciation (£100) = £13,000.

Note: Payments to suppliers and receipts from customers are not included in this calculation, as they're transfers, not income or expense items.

Now, let's calculate the net profit:

1. Subtract total costs and expenses from total sales revenue: £17,500 (revenues) - £13,000 (expenses) = £4,500.

The net profit earned by Rose Ltd in the month of May 20X8 is £4,500.