State True or False: (i) Gross profit is total revenue. (ii) In trading and profit and loss account, opening stock appears on the debit side because it forms the part of the cost of sales for the current accounting year. (iii) Rent, rates and taxes is an example of direct expenses. (iv) If the total of the credit side of the profit and loss account is more than the total of the debit side, the difference is the net profit.
False
True
False
True
Explanation
(i) Gross profit is NOT total revenue. Gross profit is calculated as total revenue minus cost of goods sold.
(ii) Opening stock appears on the debit side of the trading account because it forms part of the cost of sales for the current accounting year. This is confirmed in the context which states: 'Opening stock account, Purchases account, Wages account, Carriage inwards account and direct expenses account are closed by transferring to the debit side of the trading and profit and loss account.'
(iii) Rent, rates and taxes is NOT a direct expense. Direct expenses are those directly related to the production or purchase of goods (like wages, carriage inwards). Rent, rates and taxes are classified as indirect expenses as they are not directly tied to specific goods.
(iv) When the total of the credit side of the profit and loss account (representing incomes) exceeds the total of the debit side (representing expenses), the difference represents net profit.