Question

Gross profit of the firm was Rs. 5,00,000. Which of the following will result in an increase of Net Profit?

• A. Advertisement
• B. Rent
• C. Commission received
• D. Repairs

Hint:

Reminder Net Profit increases with additional income streams and decreases with additional expenses post-calculating Gross Profit.

Answer 1

The Correct Option is C

The formula for Net Profit is:

\( \text{Net Profit} = \text{Gross Profit} - \text{Expenses} + \text{Other Income} \)

Given:

• Gross Profit = Rs. 5,00,000
• Expenses include: Advertisement, Rent, Repairs (which reduce Net Profit)
• Other Income includes: Commission received (which increases Net Profit)

If Commission Received = \( X \), then
\( \text{Net Profit} = \text{Gross Profit} - \text{Total Expenses} + X \)

Where \( X \) is the additional income from commission.