Onuoha, trader: sales ₦120,000, purchases ₦70,000, stock ₦10,000 and ₦15,000; what is the gross profit?

Gross profit is calculated by subtracting Cost of Goods Sold (COGS) from Sales. Gross profit shows the profit from trading before deducting operating expenses.

First, calculate COGS: Opening Stock (₦10,000) + Purchases (₦70,000) – Closing Stock (₦15,000) = ₦65,000.

Then calculate Gross Profit: Sales (₦120,000) – COGS (₦65,000) = ₦55,000.

Note that audit fee, general expenses, and commission paid are not included in gross profit calculation. These are operating expenses that are subtracted from gross profit to calculate net profit. Only the trading items (sales, purchases, and stock) are used to calculate gross profit.