Question

From the following balances exatracted from the books of M/s Ahuja and Nanda.

Calculate the amount of:
(a) Cost of goods available for sale
(b) Cost of goods sold during the year
(c) Gross profit

$\begin{array}{cc}& \text{(Rs.)}\\ \text{Opening stock}& 25,000\\ \text{Credit purchase}& 7,50,000\\ \text{Cash purchase}& 3,00,000\\ \text{Credit sales}& 12,00,000\\ \text{Cash sales}& 4,00,000\\ \text{Wages}& 1,00,000\\ \text{Salaries}& 1,40,000\\ \text{Closing Stock}& 30,000\\ \text{Sales return}& 50,000\\ \text{Purchase return}& 10,000\end{array}$

Answer 1

(a) Cost of goods available for sales which mean total goods produced during the year.

Cost of Production
= (Opening Stock + Purchase + Wages - Purchase Return)
= Rs. 25,000 + (Rs. 7,50,000 + Rs. 3,00,000) + Rs. 1,00,000 - Rs. 10,000
= Rs. 11,65,000

(b) Cost of Goods sold = Cost of Production - closing Stock
= Rs. 11,65,000 - Rs. 30,000
= Rs. 11,35,000
(c) Gross Profit: For computing gross profit, preparation of Trading account would be appropriate.

$\begin{array}{ccc}& \text{Trading Account}& \end{array}$

$\begin{array}{cccc}\text{Particulars}& \text{Amt. (Rs.)}& \text{Particulars}& \text{Amt. (Rs.)}\\ \text{Opening Stock}& 25,000& \text{Sales}\text{16,00,000}& \\ \text{Purchases}\text{10,50,000}& & \text{(-)Sales Return}\underset{–}{50,000}& 15,50,000\\ \text{(-)Purchase Return}\underset{–}{10,000}& 10,40,000& \text{Closing Stock}& 30,000\\ \text{Wages}& 1,00,000& & \\ \text{Gross Profit}& 4,15,000& & \\ & \underset{–}{\overline{15,80,000}}& & \underset{–}{\overline{15,80,000}}\end{array}$