CS Executive · Corporate Accounting and Financial Management · Related Aspects of Company Accounts
For the year ended 31 March 2026, a company's total sales were Rs 20,00,000, of which Rs 6,00,000 related to the period before incorporation. The company was incorporated four months into the year. Gross profit was Rs 4,00,000. If gross profit is apportioned in the sales ratio, what is the gross profit for the pre-incorporation period?
Pre-incorporation gross profit is Rs 1,20,000. Gross profit is shared in the sales ratio, which is 6,00,000 to 14,00,000, or 3:7, so 3/10 of Rs 4,00,000 belongs to the pre-incorporation period.
- ARs 1,20,000Correct
- BRs 1,33,333
- CRs 80,000
- DRs 2,80,000
Explanation
The sales ratio is 6,00,000 : 14,00,000 = 3:7. Pre-incorporation gross profit = 4,00,000 x 3/10 = Rs 1,20,000. Rs 1,33,333 comes from wrongly using the time ratio (4/12), and Rs 2,80,000 is the post-incorporation share.
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