A trader has opening stock of Rs. 40,000, cash purchases of Rs. 160,000, credit purchases of Rs. 240,000, closing stock of Rs. 50,000, and sales of Rs. 500,000. What is the gross profit?
Correct answer: C. Rs. 110,000
- A. Rs. 90,000
- B. Rs. 100,000
- C. Rs. 110,000
- D. Rs. 130,000
Explanation
Total purchases are Rs. 400,000, and cost of goods sold is Rs. 40,000 plus Rs. 400,000 minus Rs. 50,000, or Rs. 390,000. Gross profit is therefore Rs. 500,000 minus Rs. 390,000, giving Rs. 110,000.
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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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