Gross profit is a company’s revenue minus its cost of goods sold. Gross profit is a company’s residual profit after selling a product or service and deducting the cost associated with its production and sale.

Cost of goods sold is the direct costs attributable to the production or purchase of the goods sold by a company. It excludes indirect expenses such as distribution costs and sales force cost.

Cost of goods sold = opening inventory + purchases + direct expenses – closing inventory

Cost of goods sold = 8,500 + 30,700 + 4,800 – 9,000 = Rs. 35,000

Gross profit is a company’s revenue minus its cost of goods sold. Gross profit is a company’s residual profit after selling a product or service and deducting the cost associated with its production and sale.

Cost of goods sold is the direct costs attributable to the production or purchase of the goods sold by a company. It excludes indirect expenses such as distribution costs and sales force cost.

Cost of goods sold = opening inventory + purchases – closing inventory

Thus purchases = cost of goods sold + closing inventory – opening inventory = 80,700 + 6,000 – 5,800 = Rs. 80,900

The amount of loss will be Rs. 6,00,000 only as it is restricted to the amount of insured value.

In case of normal loss, the loss is spread over the entire lot of good units, no entry is required.

The benefit of Rs. 500 earned by Ritesh should be credited to discount received account (income).

Whenever a company redeems its preference shares then the nominal value or face value of the shares is put into capital redemption reserve fund. There after this fund becomes the part of the paid capital of the company.

Capital Redemption Revere is also created when a company buys it owns shares which reduce its share capital.

Suppose, the fresh equity shares or preference shares are issued to redeem the old preference shares, in this case the difference between the face value of preference shares and fresh shares issued will be transferred to capital redemption reserve account.

The capital redemption reserve fund is transferred from undistributed profits i.e general reserves, profit or loss account.

A redeemable preference share can be redeemed entirely out of fresh issue of new preference or equity shares but not debentures.

Here the face value of the 10% Redeemable preference shares to be redeemed = 10000 × 100 =
1000000

Face value of the fresh equity shares issued for the purpose = 1000000

Thus amount to be transferred to the Capital Redemption Reserve Account = 1000000 – 1000000 = nil

Preparing a trial balance for a company serves to detect any mathematical errors that have occurred in the double-entry accounting system. Provided the total debits equal the total credits, the trial balance is considered to be balanced, and there should be no mathematical errors in the ledgers.

Sales returns book is also called returns inwards book. It is used for recording goods returned to us by our customers.

Capital is needed to create a balance between assets and liabilities. capital is the difference between the liabilities and assets.

Opening capital = opening assets – opening liabilities
Here assets = cash in hand + cash at bank + inventory + land and building + plant and machinery +
prepaid insurance + owing from Mr X = 1,000 + 5,000 + 20,000 + 1,00,000 + 50,000 + 12,500 + 500 = Rs.1,89,000
And liabilities = owing to Z Ltd. + interest received in advance = 3,750 + 250 = 4,000
So capital = 1,89,000 – 4,000 = Rs. 1,85,000

Legal expenses for a suit for breech of contract of goods is revenue expenditure