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CMA Intermediate · Corporate Accounting and Auditing · Statement of Profit and Loss and Balance Sheet (Schedule III of Companies Act, 2013)

Trial balance of Arvind Ltd. as on 31 March includes: Revenue from operations Rs 40,00,000; Purchases Rs 22,00,000; Opening inventory Rs 3,00,000; Wages Rs 2,00,000; Salaries Rs 4,00,000; Rent Rs 1,20,000 (includes Rs 20,000 paid for the next year); Interest on 10% loan of Rs 5,00,000 (nothing paid yet, nothing recorded); Depreciation to be charged Rs 1,50,000. Closing inventory is Rs 5,00,000. Ignoring tax, what is the profit for the year?

The profit works out to Rs 11,00,000, which is not among the options listed, so this item is flawed and should not be used.

  1. ARs 5,30,000Correct
  2. BRs 5,80,000
  3. CRs 6,30,000
  4. DRs 5,50,000

Explanation

Cost of materials and wages: 3,00,000 + 22,00,000 + 2,00,000 - 5,00,000 = 22,00,000. Rent expense = 1,00,000. Interest = 50,000. Expenses = 22,00,000 + 4,00,000 + 1,00,000 + 50,000 + 1,50,000 = 29,00,000? Recheck: 22,00,000 + 4,00,000 = 26,00,000; +1,00,000 = 27,00,000; +50,000 = 27,50,000; +1,50,000 = 29,00,000. Profit = 40,00,000 - 29,00,000 = 11,00,000.

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