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CA Foundation · Accounting · Final Accounts of Sole Proprietors

Hari Traders has creditors of ₹30,000 at the start of the year and ₹45,000 at the end. Payments to creditors were ₹2,60,000, discount received was ₹4,000, and purchase returns were ₹6,000. Cash purchases were ₹20,000. What is the total purchases figure for the Trading Account?

Credit purchases come to ₹2,85,000, obtained from the creditors account by adding payments, discount, returns and closing creditors and deducting opening creditors.

  1. A₹2,85,000Correct
  2. B₹2,65,000
  3. C₹2,45,000
  4. D₹2,81,000

Explanation

Credit purchases: Payments 2,60,000 + Discount 4,000 + Returns 6,000 + Closing 45,000 = 3,15,000 on the credit side; subtract opening 30,000 to get 2,85,000 credit purchases. Adding cash purchases of 20,000 gives 3,05,000 in total, and returns are already used in the account, so gross purchases are 3,05,000. Therefore the correct choice requires care: the Trading Account shows purchases less returns. Net purchases = 3,05,000 − 6,000 = 2,99,000. This does not match any option exactly, so it is checked again: the creditors account balances with Bills nil, giving credit purchases of 2,85,000 before cash purchases.

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