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CA Foundation · Accounting · Final Accounts of Sole Proprietors

The trial balance of Nair Traders shows Purchases of Rs 4,20,000 and Purchases Returns of Rs 20,000. Opening stock is Rs 60,000, wages Rs 30,000 and carriage inwards Rs 10,000. Sales are Rs 6,00,000 and Sales Returns Rs 40,000. Closing stock is Rs 80,000. What is the gross profit?

Gross profit is Rs 1,60,000. Net sales are Rs 5,60,000 after sales returns. Cost of goods sold is Rs 4,00,000, being opening stock plus net purchases, wages and carriage inwards, less closing stock. Subtracting this cost from net sales gives the gross profit.

  1. ARs 2,00,000
  2. BRs 1,60,000Correct
  3. CRs 1,20,000
  4. DRs 1,80,000

Explanation

Net sales = 6,00,000 - 40,000 = 5,60,000. Cost of goods sold = 60,000 + (4,20,000 - 20,000) + 30,000 + 10,000 - 80,000 = 4,00,000. Gross profit = 5,60,000 - 4,00,000 = 1,60,000. Rs 2,00,000 results from ignoring the sales returns.

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