Skip to content

CA Foundation · Accounting · Company Accounts

Nair Ltd. reports: Revenue from operations ₹20,00,000; Other income ₹1,00,000; Cost of materials consumed ₹9,00,000; Purchases of stock-in-trade ₹2,00,000; Decrease in inventories of finished goods ₹50,000; Employee benefit expense ₹3,00,000; Finance costs ₹60,000; Depreciation ₹1,40,000; Other expenses ₹1,50,000. Profit before tax is:

Profit before tax is ₹3,00,000. Total revenue of ₹21,00,000 including other income less total expenses of ₹18,00,000, where the decrease in inventories of finished goods is treated as an expense, gives this figure.

  1. A₹3,50,000Correct
  2. B₹3,00,000
  3. C₹4,00,000
  4. D₹2,50,000

Explanation

Total revenue = 20,00,000 + 1,00,000 = 21,00,000. Expenses = 9,00,000 + 2,00,000 + 50,000 (decrease in inventory is an expense) + 3,00,000 + 60,000 + 1,40,000 + 1,50,000 = 18,00,000... recomputed: 9,00,000+2,00,000=11,00,000; +50,000=11,50,000; +3,00,000=14,50,000; +60,000=15,10,000; +1,40,000=16,50,000; +1,50,000=18,00,000. PBT = 21,00,000 - 18,00,000 = ₹3,00,000.

Did you get it right without looking?

One question tells you little. A timed set on Company Accounts shows your real accuracy, how long you take and where you lose marks.

Practise Company AccountsFree diagnostic mock

More Company Accounts questions