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

Ravi Traders had opening stock of Rs 40,000, purchases of Rs 3,00,000, purchase returns of Rs 20,000, carriage inwards of Rs 10,000 and closing stock of Rs 50,000. Net sales were Rs 4,00,000. What is the gross profit?

Gross profit is net sales minus cost of goods sold. Cost of goods sold is 40,000 plus net purchases of 2,80,000 plus carriage of 10,000 less closing stock of 50,000, giving 2,80,000. Gross profit is therefore 4,00,000 minus 2,80,000, which is Rs 1,20,000.

  1. ARs 1,10,000Correct
  2. BRs 1,20,000
  3. CRs 1,00,000
  4. DRs 1,30,000

Explanation

Cost of goods sold = 40,000 + (3,00,000 - 20,000) + 10,000 - 50,000 = 2,80,000. Gross profit = 4,00,000 - 2,90,000? Recompute: 40,000 + 2,80,000 + 10,000 = 3,30,000; less 50,000 = 2,80,000. Gross profit = 4,00,000 - 2,80,000 = 1,20,000. Hence the correct value is Rs 1,20,000; the option Rs 1,10,000 arises from ignoring the closing-stock adjustment error.

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