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

Ramesh's trading business had opening stock of Rs 40,000, purchases of Rs 3,00,000, purchase returns of Rs 10,000, carriage inwards of Rs 5,000 and closing stock of Rs 55,000. Net sales were Rs 3,80,000. What is the gross profit shown by the Trading Account?

Gross profit is Rs 1,00,000. Cost of goods sold is opening stock 40,000 plus net purchases 2,90,000 plus carriage inwards 5,000 less closing stock 55,000, giving 2,80,000. Subtracting this from net sales of 3,80,000 leaves the gross profit of Rs 1,00,000.

  1. ARs 1,00,000Correct
  2. BRs 90,000
  3. CRs 1,05,000
  4. DRs 95,000

Explanation

Cost of goods sold = 40,000 + (3,00,000 - 10,000) + 5,000 - 55,000 = 2,80,000. Gross profit = 3,80,000 - 2,80,000 = Rs 1,00,000. Rs 95,000 would result from ignoring carriage inwards being deducted wrongly in the other direction, and Rs 90,000 from not deducting purchase returns.

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