Explanation

Net profit is what remains after deducting all business expenses from gross profit. To solve this problem, we must first calculate Cost of Goods Sold (COGS) and Gross Profit.

Step 1 – Calculate COGS: Opening Stock (₦2,200) + Purchases (₦18,000) – Closing Stock (₦1,000) = ₦19,200.

Step 2 – Calculate Gross Profit: Sales (₦27,000) – COGS (₦19,200) = ₦7,800.

Step 3 – Calculate Total Expenses: Salaries (₦1,500) + Reduction in doubtful debts (₦500) + Office expenses (₦1,100) + Other expenses (₦1,300) = ₦4,400. The reduction in doubtful debts is treated as an expense adjustment in this calculation.

Step 4 – Calculate Net Profit: Gross Profit (₦7,800) – Total Expenses (₦4,400) = ₦3,400. This final amount represents the true profit the business earned after paying all costs.