What-does-the-cost-of-goods-sold-and-gross-profit-mean- Nursing Writers Hub

Word has gotten around that you know accounting and can explain it well.  Jim, another of your friends has a unique business.  During the summer he buys hats that cost $5.00 each and sells them at the beach for $12.00 each.  Other than the cost of the hat, his only other expense last summer was $120 for parking.  He sold 78 hats last summer.  His accountant prepared a financial statement for him and he has several questions about the income statement.  He asks:
What does the cost of goods sold and gross profit mean?
How much gross profit do I make on each hat?
Why show both gross profit and net income?
If I have hats returned or a give a discount, how will that be shown on the income statement?

 
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