CA Foundation · Accounting · Accounts from Incomplete Records
A trader's cost of goods sold is ₹4,50,000 and his gross profit is 10% on sales. What is the amount of sales?
Sales were ₹5,00,000. Because gross profit is 10% of sales, cost of goods sold is 90% of sales, so sales equal ₹4,50,000 divided by 0.9. Adding 10% to cost would give ₹4,95,000, which uses the wrong base.
- A₹4,95,000
- B₹5,00,000Correct
- C₹4,05,000
- D₹5,50,000
Explanation
Cost is 90% of sales, so sales = 4,50,000 / 0.90 = 5,00,000. Check: 10% of 5,00,000 = 50,000 and 5,00,000 - 50,000 = 4,50,000. Adding 10% to cost (4,95,000) wrongly treats the rate as a mark-up on cost.
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