PRACTICE QUESTIONS 7

Given below is the information extracted from records of XYZ Company

Rs.
Opening stock 10,000
Sales 80,000
Purchases 70,000
Gross profit rate 25% on sales

Required
Calculate the closing stock

SOLUTION

Formula
C = Cost
C+P=S P = Profit
75 + 25 = 100 S = Sales
If margin is given sales will be 100
If markup is given cost will be 100

For Method 1 *
Formula
CGS= 80,000 / 100 x 75 = Rs. 60,000
Given in Rs / Given in % x Required %

For Method 2 *
Formula
Gross Profit = 80,000 / 100 x 25 = Rs. 20,000
Given in Rs / Given in % x Required %

Calculation of Opening Stock

Method 1 (Reverse Calculation)

Opening Inventory 10,000

Purchases 70,000
80,000
Closing Inventory 20,000
Cost of Goods Sold 60,000*

Method 2 (T-Account)

Particulars Rs. Particulars Rs.

Opening Inventory 10,000 Sales 80,000
Purchases 70,000
Gross Profit 20,000* Closing Inventory 20,000