Which of the following is correct chronological order of ascertainment of the following profits from the trading & profit and loss account?
(A) Operating Profit
(B) Gross Profit
(C) Net Profit
Choose the correct answer from the options given below.
Answer & explanation
Correct answer: option 1
The correct answer is option 1- (B), (A), (C).
The correct chronological order of ascertainment of profits from the trading and profit and loss account is as follows:
(B) Gross Profit- Gross Profit is the profit earned after deducting the cost of goods sold (COGS) from net sales revenue.
(A) Operating Profit- Operating Profit is calculated after deducting operating expenses (such as wages, rent, utilities, etc.) from gross profit.
(C) Net Profit- Net Profit is the final profit figure after deducting all expenses, including non-operating expenses (such as interest and taxes), from operating profit.