Profit and Loss Accounts and the Cost of Shipping
A market trader (registered as a sole trader) imports t-shirts from Asia. Each t-shirt costs £3 to buy and 50p to ship. He sells the t-shirts for £10 each and pays £100 a week for his stall at the market. In the course of the financial year, he imports 5,000 t-shirts and sells 3,000. At the end of the financial year, he draws up a profit and loss account. Which profit and loss account is correct, (A) or (B)? What does HM Revenue & Customs have to say about this?
(A)
SALES: £30,000
COST OF GOODS SOLD: £9,000
GROSS PROFIT: £21,000
RENT: £5,200
SHIPPING COSTS: £2,500
NET PROFIT: £13,300
(B)
SALES: £30,000
COSTS OF GOODS SOLD: £10,500
GROSS PROFIT: £19,500
RENT: £5,200
NET PROFIT: £14,300
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