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CSEET · Fundamentals of Accounting · Preparation of Final Accounts for Sole Proprietorship

Meera Stores sold goods for Rs 5,00,000 at a gross profit of 20% on cost. Opening stock was Rs 60,000 and closing stock Rs 80,000. What were the net purchases, ignoring other direct expenses?

Cost of goods sold is sales divided by 1.20, about Rs 4,16,667. Adding closing stock and subtracting opening stock gives purchases of about Rs 4,36,667. The listed option Rs 4,16,667 only equals cost of goods sold and ignores the stock adjustment.

  1. ARs 4,20,000
  2. BRs 4,36,000
  3. CRs 4,16,667Correct
  4. DRs 4,00,000

Explanation

Sales = cost x 1.20, so cost of goods sold = 5,00,000/1.2 = 4,16,667 approx. Cost of goods sold = opening stock + purchases - closing stock, so purchases = 4,16,667 + 80,000 - 60,000 = 4,36,667. This matches none exactly, so recheck options: the nearest sound answer is 4,36,667.

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