A sole trader has net sales of Rs. 250,000, opening inventory of Rs. 40,000, purchases of Rs. 140,000, carriage inward of Rs. 10,000 and closing inventory of Rs. 30,000. What is the gross profit?
Correct answer: B. Rs. 90,000
- A. Rs. 80,000
- B. Rs. 90,000
- C. Rs. 100,000
- D. Rs. 110,000
Explanation
Cost of goods sold is Rs. 40,000 + Rs. 140,000 + Rs. 10,000 − Rs. 30,000 = Rs. 160,000. Gross profit is net sales of Rs. 250,000 less Rs. 160,000, giving Rs. 90,000.
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About Financial Statements of Sole Traders
Sole trader statements calculate revenue, cost of sales, gross profit, operating expenses and net profit, then present assets, liabilities and owner’s capital in the statement of financial position. Adjustments for closing inventory, accruals, prepayments, depreciation, bad debts, drawings and additional capital connect the two statements.
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