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CMA Foundation · Fundamentals of Financial and Cost Accounting · Financial Statements of Sole Proprietorship

The trial balance of Ramesh Traders shows Opening stock ₹40,000, Purchases ₹3,10,000, Purchase returns ₹10,000, Wages ₹20,000, Carriage inwards ₹5,000 and Sales ₹4,50,000. Closing stock is ₹60,000. What is the gross profit?

Gross profit is ₹1,45,000. Cost of goods sold is opening stock 40,000 plus net purchases 3,00,000 plus wages 20,000 plus carriage inwards 5,000, less closing stock 60,000, giving 3,05,000. Deducting this from sales of 4,50,000 gives the gross profit.

  1. A₹1,45,000Correct
  2. B₹1,35,000
  3. C₹1,25,000
  4. D₹1,50,000

Explanation

Cost of goods sold = 40,000 + (3,10,000 - 10,000) + 20,000 + 5,000 - 60,000 = 3,05,000. Gross profit = 4,50,000 - 3,05,000 = 1,45,000. Ignoring the purchase returns would give 1,35,000, which is wrong.

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