SHS

Business Mathematics
Quarter 1,Week 7 –Module 12
Illustrating How Profit is Obtained
and How to Avoid Loss in a Given
Transaction- ABM_BM11BS-Ii-7

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Business Mathematics – SHS
Quarter 1, Week 7 – Module 12: Illustrating How Profit is Obtained and How to Avoid
Loss in a Given Transaction

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Regional Director: Gilbert T. Sadsad

Assistant Regional Director: Jessie L. Amin

Development Team of the Module

Writer: MARIA ASUNCION T. BRIZUELA, ABM Teacher , Tabaco NHS
Editors: NERISSA A. MORTEGA, HT III, San Lorenzo NHS
JULMA B. CARGULLO, MT, TNHS
HILDA J. CARLET, MT, TNHS
Language Editors: CHERRY BASILLA, TNHS
DESIREE CANICULA, TNHS
Reviewers: DIOLETA B. BORAIS, EPS, Tabaco City
JINKY VILLAREAL, EPS, Iriga City
JONJON MONTER, Principal, Sagrada HS, Iriga City
LOYD BOTOR, EPS, RO V
Layout Artist: ROWENA B. BENOYO, San Lorenzo NHS

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 Business Mathematics – Grade SHS
Quarter 1, Week 7 – Module 12
Illustrating How Profit is Obtained and How to Avoid Loss in a Given Transaction

I. Introduction

Businesses make use of calculations to gauge whether they are making

money or incurring losses. Businessmen use a financial tool called “Statement
of Profit and Loss” to find out if the company is earning or losing.
In this module, we will explore and find out how profit is obtained and how
to avoid loss in a given transaction.

II.Objective:

At the end of this module, you should be able to:

• illustrate how profit is obtained and how to avoid loss in a given

transaction

III. Vocabulary List

• Sales – revenue or income

• Cost of Sales – direct costs
• Gross Profit – after deducting the cost of sales from the sales
• Operating Profit - after deducting the operating expenses from the
gross profit
• Operating Expenses – Overhead
• Net Profit – After adding other income and deducting other expenses
from the operating profit
• Net Loss – Deficit
IV.Pre-Test:
Let us find out how far you’ve gone! Answer the questions below.

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 Mary has a small store. Last week, she purchased a merchandise that
costs Php 69,000 with a freight of Php 5,500. She sold all of the
merchandise for Php 92,000 after spending for various operating
expenses amounting to Php15,000. She also paid Php1,300 for the
interest of the money borrowed for her store.

a. How much was her cost of sales?

b. How much gross profit did she make?
c. How much operating profit did she make?
d. What was her net profit?

V – Learning Activities:

Lesson 1

Statement of Profit and Loss for a Trading Firm

Please Read!

A trading or merchandising firm

buys goods that it sells. Whatever it buys,
it sells. To know how profit is obtained
and how to avoid loss in a given
transaction, Income Statement or
Statement of Profit and Loss will be
illustrated in this lesson. What is Income
Statement or Statement of Profit and
Loss? It is a financial statement that
shows the results of operation, that is, if it
earns a profit or incur a loss for a given
period of time. Generally, it is prepared on
a monthly basis. However, for tax
purposes, it is prepared quarterly and
annually.

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▪ What are the steps in preparing the Income Statement or Statement of Profit
and Loss?

Please see illustration below:

Hope Merchandising
Statement of Profit and Loss
For the Year Ended December 31, 2019

Sales P325,000
Less: Cost of Sales 122,000
Gross Profit P203,000
Less: Operating Expenses
Advertising Expense P1,500
Transportation Expense 4,100
Rent Expense 7,500
Salaries Expense 10,500
Bad Debts Expense 500
Office Supplies Expense 1,900
Store Supplies Expense 3,500
Depreciation Expense 4,000 33,500
Operating Profit P169,500
Add: Other Income
Interest Income P800
Commission Income 1,500 2,300
P171,800
Less: Other Expense
Interest Expense 1,100

Net Profit P170,700

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Learning Situation 1:

The following are the data of Daewoo Marketing Co. for the
year ended June 30, 2019:

Sales P428,300
Purchases (merchandise) 295,000
Freight-in 6,500
Taxes and Licenses 3,700
Communication Expense 2,500
Utilities Expense 2,140
Store Supplies Expense 3,200
Office Supplies Expense 4,135
Interest Expense 2,030

a. How much is the cost of sales?

b. How much is the Gross Profit?
c. How much is the Operating Profit?
d. How much is the Net Profit?
e. Prepare a Statement of Profit and Loss

Solutions:
a. Purchases P295,000
Add: Freight-in 6,500
Cost of Sales P301,500

b. Sales P428,300
Less: Cost of Sales 301,500
Gross Profit P126,800

c. Gross Profit P126,800

Operating Expenses 15,675
Operating Profit P111,125

d. Operating Profit P111,125

Other Expense:
Interest Expense 2,030
Net Profit P109,095

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 e. Statement of Profit and Loss

Daewoo Marketing Co
Statement of Profit and Loss
For the Year Ended June 30, 2019

Sales P428,300
Less: Cost of Sales
Purchases P295,000
Freight-in 6,500 301,500
Gross Profit P126,800
Less: Operating Expenses
Taxes and Licenses 3,700
Communication Expense 2,500
Utilities Expense 2,140
Store Supplies Expense 3,200
Office Supplies Expense 4,135 15,675
Operating Profit P111,125
Less: Other Expense
Interest Expense 2,030

Net Profit P109,095

V. Practice Exercises:
Practice Task 1:
Illustrate the profit or loss by answering the following questions:

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 Practice Task 2:

Find the profit or loss by illustrating it in the statement of profit and loss.

Use the following information to prepare an Income

Statement or Statement of Profit and Loss for Ace Merchandising for
the year ended June 30, 2018.

Sales P 421,000
Purchases (Merchandise) 210,000
Freight-in 1,500
Advertising Expense 3,100
Salaries 50,500
Supplies Expense 1,800
Utilities Expense 6,300
Insurance Expense 3,200
Depreciation Expense 11,500
Interest Expense 900

Required: Illustrate how profit is obtained by preparing the Income

Statement.

VII. Post-Test
I. Identification:

1. Sales minus Sales Returns and Allowances, and Sales Discounts

2. Net Sales minus the Cost of Goods Sold
3. Gross Profit minus Operating Expenses
4. Operating Income plus Other Income minus Other Expenses

II – Solve the following problem.

ABC company showed Net Sales of P890,000, Cost of Goods Sold of

P350,800 and Total Operating Expenses of P310,000 for the year ended
December 31 2019. What was the Gross Profit?

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VIII.Assignment

You were given the following data for the Iverson Co. as of January
31, 2019:

Sales P735,500
Purchases (merchandise) 85,000
Freight-in 7,000
Taxes and Licenses 1,500
Communication Expense 900
Heat, Light, and Water 2,500
Store Supplies Expense 1,500
Office Supplies Expense 1,000
Miscellaneous Expense 950

a. How much is the cost of sales?

b. How much is the Gross Profit?
c. How much is the Operating Profit?
d. How much is the Net Profit?
e. Prepare an Income Statement

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 Key to Correction

Pre-Test
a. Purchases (merchandise) P69,000
Freight-in 5,500
Cost of Sales P74,500

b. Sales P92,000
Cost of Sales 74,500
Gross Profit P17,500

c. Gross Profit P17,500

Operating Expenses 15,000
Operating Profit P2,500

d. Operating Profit P2,500

Interest Expense 1,300
Net Profit P1,200

Practice Task 1

a. Purchases P98,500
Add: Freight-in 3,000
Cost of Sales P101,500

b. Sales P290,000
Less: Cost of Sales 101,500
Gross Profit P188,500

c. Gross Profit P188,500

Operating Expenses 15,550
Operating Profit P172,950

d. Operating Profit P172,950

Other Income 7,500
Net Profit P180,450

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Practice Task 2

Post- Test
I-
1. Net Sales
2. Gross Profit
3. Operating Income
4. Net Income
II -
a. Net Sales P890,000
Cost of Goods Sold 350,800
Gross Profit P539,200

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 Assignment:
a. Purchases (merchandise) P85,000
Freight-in 7,000
Cost of Sales P92,000

b. Sales P735,500
Cost of Sales 92,000
Gross Profit P643,500

c. Gross Profit P643,500

Operating Expenses 7,400
Operating Profit P636,100

d. Operating Profit P636,100

Miscellaneous Expense 950
Net Profit P635,150

References:
All contents of this module is credited to the rightful owner.

• Business Math Textbook (Government Property) Copyright @ 2016 by Vibal

Group, Inc and Brian Roy C. Lopez, Leah C. Martin-Lundag, and Keneth
Adrian Dagal. Pages 93-95
• Business Mathematics by Norma D. Lopez-Mariano, PhD ABM –
Accountancy, Business and Management K12 First Edition Pages 127-128

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