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CA Foundation · Accounting · Final Accounts of Sole Proprietors

The trial balance of Nandini Traders shows Purchases ₹4,00,000, Purchase Returns ₹20,000, Opening Stock ₹60,000, Wages ₹30,000 and Sales ₹6,00,000. Closing stock is ₹70,000. What is the gross profit?

Gross profit is ₹2,00,000. Cost of goods sold is opening stock 60,000 plus net purchases 3,80,000 plus wages 30,000 less closing stock 70,000, giving 4,00,000. Deducting this from sales of 6,00,000 gives the gross profit.

  1. A₹1,80,000Correct
  2. B₹2,00,000
  3. C₹1,60,000
  4. D₹2,10,000

Explanation

Cost of goods sold = 60,000 + (4,00,000 − 20,000) + 30,000 − 70,000 = 4,00,000. Gross profit = 6,00,000 − 4,00,000 = 2,00,000. Check: 60,000 + 3,80,000 + 30,000 = 4,70,000; less 70,000 = 4,00,000. So the gross profit is ₹2,00,000, which is the second option, not the first.

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