| Definition of Gross Profit : | ||||||||
| Gross Profit is defined as Net Sales minus Cost of Goods Sold. | ||||||||
| It is also referred to as Gross Margin. | ||||||||
| Formula : | ||||||||
| Gross Profit = Sales – Cost of Goods Sold (COGS) | ||||||||
| COGS = Opening Stock + Purchases – Closing Stock | ||||||||
| Now, | ||||||||
| Gross Profit = Sales – (Opening Stock + Purchases – Closing Stock) | ||||||||
| OR | ||||||||
| Gross Profit = Sales – Opening Stock – Purchases + Closing Stock | ||||||||
| OR | ||||||||
| Gross Profit = Sales + Closing Stock – Opening Stock – Purchases | ||||||||
| **Purchases (For Trading Business) = Goods/Stock Purchased + Carriage Inward | ||||||||
| **Purchases (For Manufacturing Business) = Raw Materials + Variable Expenses | ||||||||
| # Variable Expenses = Direct Labour , Freight, Packaging, Etc. |
Gross Profit (GP) Formula, How to calculate Gross Profit
