Question

From the following information, calculate Gross Profit Ratio:

	₹			₹
Credit Sales	5,00,000		Decrease in Inventory	10,000
Purchases	3,00,000		Returns Outward	10,000
Carriage Inwards	10,000		Wages	50,000
			Rate of Credit Sale to Cash Sale	4:1

Answer 1

Credit Sale = Rs 5,00,000
Rate of Credit Sale to Cash Sale = 4:1
$\mathrm{Cash}\mathrm{Sale}=\frac{1}{4}\times 5,00,000=\mathrm{Rs}1,25,000$

Total Sales = Cash Sales + Credit Sales = Rs 1,25,000 + Rs 5,00,000 = Rs 6,25,000
Cost of Goods Sold = Purchases – Return Outward + Carriage Inwards + Wages + Decrease in Inventory
= Rs 3,00,000 – Rs 10,000 + Rs 10,000 + Rs 50,000 + Rs 10,000
= Rs 3,60,000
Gross Profit = Total Sales – Cost of Goods Sold
= Rs 6,25,000 – Rs 3,60,000 = Rs 2,65,000

$\mathrm{Gross}\mathrm{Profit}\mathrm{Ratio}=\frac{\mathrm{Gross}\mathrm{Profit}}{\mathrm{Net}\mathrm{Sales}}\times 100=\frac{2,65,000}{6,25,000}\times 100=42.40\%$