A business has sales of Rs. 500,000 and a gross profit equal to 25% of sales. What is the cost of goods sold?
Correct answer: A. Rs. 375,000
- A. Rs. 375,000
- B. Rs. 400,000
- C. Rs. 125,000
- D. Rs. 475,000
Explanation
Gross profit is 25% of Rs. 500,000, giving Rs. 125,000. Cost of goods sold is sales minus gross profit, so it is Rs. 375,000. The amount of Rs. 125,000 is the gross profit, not the cost of goods sold.
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About Incomplete Records
Incomplete records require profit and financial position to be reconstructed when a complete double-entry system is unavailable. Methods include statements of affairs, capital comparisons, control accounts, cash summaries and margin calculations to find missing sales, purchases, expenses, assets, liabilities and drawings, while distinguishing business profit from changes in capital.
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