j43 Expenses on Purchases etc. In the Illustrations given above, we have presumed that the trader has not incurred any expenses for purchase of goods and bringing them to his shop for sale. However, a trader has to incur various types of expenses for purchasing of goods as well as for bringing them to his shop for sale. Such expenses may include brokerage or commission paid to agents for purchase of goods, cartage or carriage charges for bringing the goods to the trader's shop, wages paid to coolies for transportation of goods etc. All such expenses increase the cost of the goods sold and hence they have also to be included in the cost of purchasing the goods. In other words, cost of goods sold will be calculated as follows: COSTOF GOODS SOLD=OP. STOCK+NET PURCHASES + EXPS ON PURCHASING OF GOODS - CL. STOCK Cost of goods sold calculated as above will then be compared with the net sales to find out the amount of profit or loss made by the business. This will be clear with the following illustrations: Calculate the amount of the profit made by the trader with the help of data given in Illustration 6.3. if the wages, carriage charges etc. incurred for bringing the goods to the trader's shop amount to Rs 5,000. Particulars Amount Rs Net Sales 50,000 Less: Cost of goods sold (30,000 + 5000) 35,000 Gross Profit 15,000 The term 'merchandise' is also used for the term "goods" Thus: COST OF GOODS COST OF MERCHANDISE COST OF GOODS PURCHASED COST OF MERCHANDISE PURCHASED COST OF GOODS SOLD = COST OF MERCHANDISE SOLD Illustration 6.5. Find out the cost of merchandise purchased, cost of merchandise sold, cost of merchandise unsold and Gross Profit from the following transactions: Rs Purchases (3,000 articles) 25,000 Freight 1,000 Local Taxes 1,000 Salaries 2,500 Shop Rent 500 Godown Rent 500 Electrical Charges Municipal Taxes 200 Stationery 250 Furniture (estimated life 5 years) 12,000 Sales (2.700 articles) 32,000 600