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

The trial balance of Mr. Rohan Mehta shows Purchases ₹3,20,000, Purchases returns ₹20,000, Opening stock ₹50,000, Sales ₹5,00,000, Sales returns ₹10,000 and Wages ₹40,000. Closing stock is ₹60,000. What is the gross profit?

Gross profit is net sales minus cost of goods sold. Net sales are ₹4,90,000 and cost of goods sold is ₹3,30,000, found from opening stock, net purchases and wages less closing stock. The gross profit therefore equals ₹1,60,000.

  1. A₹1,70,000Correct
  2. B₹1,80,000
  3. C₹1,60,000
  4. D₹2,00,000

Explanation

Net sales = 5,00,000 - 10,000 = 4,90,000. Cost of goods sold = 50,000 + (3,20,000 - 20,000) + 40,000 - 60,000 = 3,30,000. Gross profit = 4,90,000 - 3,30,000 = 1,60,000... recheck: 50,000+3,00,000+40,000 = 3,90,000; less 60,000 = 3,30,000; gross profit = 4,90,000 - 3,30,000 = 1,60,000.

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