Place an x in the column which classifies the following receipts and payments made by Bloggs Garage. Profits can be
Place an x in the column which classifies the following receipts and payments made by Bloggs’ Garage.
Profits can be calculated by using the ‘net asset method’. This method of discovering profit is like a forensic archaeologist discovering a skeleton. We are unable to see the details of how the
profit was arrived at just as the archaeologist cannot determine whether the person was fat or thin or whether they were beautiful or plain from looking at their skeleton.
We need to put some flesh on our skeleton. We need to put some detail into our profit calculations.
The details of how profits are arrived at are shown in two statements:
■ The trading account and
■ The profit and loss account.
Both of these statements are fairly easy to understand.
This problem has been solved!
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