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    8. Computation of Gross profit

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    renlie jane pedronan

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    8. Computation of Gross profit

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    8. Computation of Gross profit

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    renlie jane pedronan

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    Subject: Entrepreneurship 11

    Topic: Computation of Gross Profit


    Teacher: Renlie Jana Pascua-Pedronan

    As we all know that profit is a financial gain from a transaction or from a period of
    investment or business activity, usually calculated as income in excess of costs or as the final value
    of an asset in excess of its initial value.
    It is a total revenue minus total expenses, profit is the amount of money a business
    "makes" during a given accounting period. The more profit you make, the better, as profit can be
    re-invested into the business or retained by the business owners. Being able to accurately
    determine your business's profit is an essential part of being able to judge its financial health. It
    can also help you decide how to price your goods and services, how to pay your employees, and
    more.
    To make your business gain more profit, begin by adding up all of the money your business
    has made in a set period of time (either, quarterly, yearly, monthly, etc. Other sources, like
    products sold, services rendered, membership payments, or, in the case of government agencies,
    taxes, fees, the sales of resource rights, and so on.
    Note that you will need to subtract any amount of cash refunded to customers for returns
    or disputes in order to find an accurate figure for your total income.
    It's easier to understand the process of calculating a business's profit by following along
    with an example.
    Let's say that we own a small publishing business. In the last month, we sold P20,000
    worth of books to retailers in the area. However, we also sold the rights to one of our intellectual
    properties for P7,000 and received P3,000 from book retailers for official promotional materials. If
    these represent all of our revenue sources, we can say that our total income is P20,000 + P7,000 +
    P3,000 = P30,000.

    Let’s review of what is revenue of the business. This is an important tool and materials
    needed in the operation of the business. It is said that revenue is the result when sales exceed the
    cost to produce or manufacture goods/merchandise as well as costs incurred in selling.
    Forecast is advance information that could help us prepare and ready for any incoming
    event. Forecasting is the tool used in planning that aims to support management or a business
    owner in its desire to adjust and cope up with uncertainties of the future. If anyone of us can
    predict that we can be rich so it means all of us will be rich. This fantasy is played out every day in
    boardrooms across the globe with the practice of business forecasting.
    It is important to have a good organization in the business to easily grow and expand in the
    future.

    Compute the Gross Profit


    The profitability ratios are a group of financial statement that primarily determine the
    profitability of the business operation.
    The gross profit rate on a product is computed as:

    Net Sales xxxxxxx


    Less: Cost of sales xxxxxxx
    Gross profit xxxxxxx

    By using the formula , the gross of XYZ Trading in the year 2017
    Net Sales Php 734, 000.00
    Less: Cost of Sales 577, 000.00
    Gross Profit 157, 000.00

    Profit is the gross income. The amount of gross profit provides information to the
    entrepreneur about revenue earned from sales.

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