# Gross Profit

Gross Profit is also called Gross Margin as a percentage of Net Sales. The calculation of the Gross Profit is: Sales minus Cost of Goods Sold. The Cost of Goods Sold consists of the fixed and variable product costs, but it excludes all of the selling and administrative expenses.

Accounting profit formula is used to calculate profit that incurred after selling the goods. Profit can be defined as the difference between the cost price and the sale price of a product where sale price is always greater than the cost price. However in

Profit and Loss Account in Statement Form/Income Statement: Trading and profit and loss account/income statement may be prepared either in account form (T form) or in report form (statement form). Trading and profit and loss account in both the forms give the same information.

Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales. Components: The basic components for the calculation of gross profit ratio are gross profit and net sales.Net sales means that sales minus sales returns. Gross profit would be the difference betweennet sales and cost of goods sold. Cost of goods sold in

Gross Profit Analysis (GP Analysis): After studying this chapter you should be able to: Gross profit is the difference between the cost of goods sold and sales. Since the adherence of the actual to the budgeted or standard gross profit figure is highly desirable, a careful analysis of unexpected