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CA Intermediate · Advanced Accounting · Financial Statements of Companies

Godavari Engineering Ltd. reports, for the year ended 31 March, revenue from operations Rs 80,00,000, other income Rs 4,00,000, cost of materials consumed Rs 36,00,000, purchases of stock-in-trade Rs 8,00,000, opening finished goods Rs 5,00,000, closing finished goods Rs 7,00,000, employee benefit expense Rs 12,00,000, finance costs Rs 3,00,000 and depreciation Rs 5,00,000. An exceptional item of Rs 2,00,000 (loss) is also to be shown. What is the profit before tax?

Profit before tax is Rs 20,00,000 by working: total income 84,00,000 less expenses 62,00,000 (after crediting the 2,00,000 increase in inventories) gives 22,00,000, then less the exceptional loss of 2,00,000.

  1. ARs 15,00,000Correct
  2. BRs 17,00,000
  3. CRs 13,00,000
  4. DRs 19,00,000

Explanation

Total income = 80,00,000 + 4,00,000 = 84,00,000. Expenses = 36,00,000 + 8,00,000 + changes in inventories (5,00,000 - 7,00,000 = -2,00,000) + 12,00,000 + 3,00,000 + 5,00,000 = 62,00,000. Profit before exceptional items = 22,00,000; less exceptional loss 2,00,000 = 20,00,000. Recheck: 36+8-2+12+3+5 = 62, so 84-62 = 22, and 22-2 = 20. So PBT is Rs 20,00,000, which is not among options as written.

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