Explain the meaning of Gross Profit, Operating Profit and Net Profit.

1.	Explain the meaning of Gross Profit, Operating Profit and Net Profit.
Answer» 1. Meaning of Gross Profit: Gross profit means difference between selling price and cost price of the goods sold. In other words, the credit balance of trading account is known as Gross profit. 2. Meaning of Operating Profit: Operating profit means difference between Gross profit and Operating expenses. Operating profit = Gross profit – Operating expenses Where. Operating expenses = General administrative expenses + Selling and Distribution expenses + Depreciation 3. Meaning of Net Profit: Net profit means difference between the total of all incomes and the total of all expenses. In other words, the credit balance of Profit and Loss Account is known as Net profit.

Answer»

1. Meaning of Gross Profit: Gross profit means difference between selling price and cost price of the goods sold. In other words, the credit balance of trading account is known as Gross profit.

2. Meaning of Operating Profit: Operating profit means difference between Gross profit and Operating expenses.
Operating profit = Gross profit – Operating expenses
Where. Operating expenses = General administrative expenses + Selling and Distribution expenses + Depreciation

3. Meaning of Net Profit: Net profit means difference between the total of all incomes and the total of all expenses. In other words, the credit balance of Profit and Loss Account is known as Net profit.

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