Question

Find out value of closing stock from the following:
Opening stock Rs. $70,000$
Purchases during the period Rs. $4,16,000$
Sales during the period Rs. $5,22,000$
Gross profit earned: $25$% of cost

• A. Rs. $68,400$
• B. Rs. $36,000$
• C. Rs. $94,500$
• D. None of these

Answer 1

The correct option is A Rs. $68,400$

Accounting Equation to find out the cost of goods sold is :

Cost of Goods sold = Opening stock + Purchases - Closing Stock

Gross Profit earned is 25% on cost.

Let us assume cost is Rs.100

GP will @25% on cost i.e. Rs.25

Hence sales becomes cost of goods sold + Profit i.e. Rs.100 + Rs.25= Rs.125

Therefore Gross Profit on sales will be = Gross Profit / Sales * 100

Profit on sales = Rs.25 / Rs.125 * 100 i.e 20% on Sales

In the given problem Sales is Rs. 522000

Hence Gross Profit will be 20% of Rs.522000 i.e. Rs.104400

Cost of Goods Sold = Rs.522000 - Rs.104400

Cost of goods sold = Rs.417600

Therefore

Rs.417600 = Rs.70000 + Rs.416000 - Closing stock

Closing stock = Rs.486000 - Rs.417600

Closing Stock = Rs.68400