Skip to content

CMA Foundation · Fundamentals of Financial and Cost Accounting · Four Frameworks of Accounting and Forms of Organization

Verma Traders purchased goods for ₹90,000 in March 2025, of which goods costing ₹60,000 were sold on credit for ₹84,000 before 31 March 2025. The remaining goods were unsold. Customers paid ₹50,000 by 31 March. Under the accrual basis and matching concept, what is the gross profit for the year ended 31 March 2025?

Gross profit is ₹24,000. Under the accrual basis, revenue of ₹84,000 is recognised when the credit sales are made, regardless of cash collected. Matching it with the cost of goods actually sold, ₹60,000, gives ₹24,000. The unsold goods stay in closing stock.

  1. A₹24,000Correct
  2. B₹20,000
  3. C₹30,000
  4. D₹ -6,000

Explanation

Under accrual accounting, revenue is recognised on sale, not on cash receipt. Sales are ₹84,000 and the cost of goods sold is ₹60,000, so gross profit is ₹24,000. Using cash received of ₹50,000 would give ₹-10,000 on a total purchase basis, which is wrong, and subtracting all purchases from sales would give ₹-6,000.

Did you get it right without looking?

One question tells you little. A timed set on Four Frameworks of Accounting and Forms of Organization shows your real accuracy, how long you take and where you lose marks.

Practise Four Frameworks of Accounting and Forms of OrganizationFree diagnostic mock

More Four Frameworks of Accounting and Forms of Organization questions