Page 171 - DMGT104_FINANCIAL_ACCOUNTING

Unit 8: Financial Statements

Non operating expenses are such expenses which are incidental or indirect to the main operations Notes
of the business. Such expenses are interest on loan, charities and donations, loss on sale of fixed
assets, loss due to theft, pilferage or loss by fire.
Non-operating income is receipt of interest, rent, dividend, profit on sale of fixed assets etc. Such
incomes are always added in order to compute net profit.

Illustration 4: Compute operating profit and net profit from the following information:
Particulars ( ) Particulars ( )
Gross profit 2,50,000 Donation 4,250
Salaries 77,000 Rent received 2,300
Advertizing 4,000 General Expenses 550
Rent and taxes 26,500 Interest on investment 4,300
Insurance charges 3,720
Audit fee 2,700
Carriage outward 1,210
Loss on sale of plant 3,100
Printing and stationery 1,100
Interest on loans 15,000
Loss by theft 12,500
Profit on sale of Machinery 41,000

Solution:
Statement showing operating profit & Net profit
Particulars ( ) ( )
Gross Profit 2,50,000
Less
Office and administrative expenses
Salaries 77,000
Rent and taxes 26,500
Insurance charges 3,720
Audit fee 2,700
Printing and stationery 1,100
General expenses 550 1,11,570
Less
Selling and distributive expenses 1,210
Carriage outwards 4,000 5,210 -1,16,780
Advertising 1,33,220
Operating profit
Add-
Non operating Income-
Interest on investments 4,300
Rent received 2,300
Profit on sale of Machinery 41,000 47,600 +47,600
Less 1,80,820
Non operating expense- Contd.. .
Interest on loans 15,000
Loss on sale of plant 3,100
Donations 4,250
LOVELY PROFESSIONAL UNIVERSITY 165
Loss by theft 12,500 34,850 – 34,850
Net profit 1,45,970