Gross profit = (sales - sales returns + discounts allowed not taken up) - (opening inventory + purchases - purchases returns - discounts received - closing inventory)

Question

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Gross profit is calculated by subtracting the cost of goods sold from sales revenue. The cost of goods sold is calculated by adding opening inventory to purchases and then subtracting purchases returns, discounts received, and closing inventory.

Gross Profit = (Sales - Sales Returns + Discounts Allowed