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CA Foundation · Accounting · Final Accounts of Sole Proprietors

Sharma Stores sells goods at a uniform gross profit of 25% on cost. Net sales for the year were Rs 7,50,000. Opening stock was Rs 70,000 and purchases were Rs 5,80,000. There are no other direct expenses. What is the value of closing stock?

Closing stock is Rs 50,000. Since profit is 25% on cost, cost of goods sold is 7,50,000 divided by 1.25, which is Rs 6,00,000. Goods available were Rs 6,50,000, so the unsold balance is Rs 50,000.

  1. ARs 50,000Correct
  2. BRs 1,50,000
  3. CRs 75,000
  4. DRs 1,00,000

Explanation

Gross profit is 25% on cost, so cost of goods sold = 7,50,000 x 100/125 = 6,00,000. Goods available = 70,000 + 5,80,000 = 6,50,000. Closing stock = 6,50,000 - 6,00,000 = 50,000. Using 25% on sales would give COGS 5,62,500 and stock 87,500, which is wrong.

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