CMA Intermediate · Financial Accounting · Financial Statements from Incomplete Records
A trader sells goods at a profit of 20% on cost. Sales for the year were ₹6,00,000. What is the gross profit?
Gross profit is ₹1,00,000. A 20% markup on cost means sales equal 120% of cost, so cost is 6,00,000 divided by 1.2, or ₹5,00,000, and the difference from sales gives the profit. Applying 20% to sales would be wrong.
- A₹1,00,000Correct
- B₹1,20,000
- C₹1,50,000
- D₹80,000
Explanation
Markup 20% on cost means cost = 6,00,000 / 1.20 = ₹5,00,000. Gross profit = 6,00,000 - 5,00,000 = ₹1,00,000. The option ₹1,20,000 wrongly applies 20% to sales, which is the margin method.
Did you get it right without looking?
One question tells you little. A timed set on Financial Statements from Incomplete Records shows your real accuracy, how long you take and where you lose marks.
More Financial Statements from Incomplete Records questions
- Which statement about the Statement of Affairs method of ascertaining profit from incomplete records is correct?
- A trader does not maintain double-entry books. To find the profit for the year, which statement is correct under the statement of affairs (n…
- A trader's opening stock was ₹80,000, purchases ₹4,20,000 and closing stock ₹1,00,000. He sells goods at a mark-up of 25% on cost. Credit sa…
- Opening capital of Ramesh Traders was ₹4,00,000 and closing capital was ₹5,10,000. During the year Ramesh withdrew ₹60,000 for personal use,…
- A trader keeps no sales records. Cost of goods sold was Rs 6,00,000 and the firm sells at a margin of 20% on sales. Opening stock was Rs 70,…
- Closing capital of Sunil Rao as per the Statement of Affairs was initially Rs 3,50,000. Later it was found that (i) stock worth Rs 15,000 wa…