rat65 (IPCC student) (87 Points)
01 March 2010Data pertaining to R Ltd. for the month of June 2004:
Particulars Rs.
Opening Stock 30,000
Closing Stock 40,000
Purchases 5,60,000
Returns Outward 15,000
Returns Inward 20,000
Carriage Inward 5,000
If the gross profit is 20% of net sales, the gross sales for the month of June 2004 is
(a) Rs.6,95,000 (b) Rs.6,75,000 (c) Rs,5,40,000 (d) Rs.6,68,750
The answer given in the book is (a) but I'm getting (b).......If the book answer is right, how?
ashish gupta
( student)
(1922 Points)
Replied 02 March 2010
Option (a) is right. as Net Profit is Rs.135000 that is 20% of Rs.675000 i.e. Net Sales ( 695000-20000) so the gross sales will be Rs.695000/-
I hope u will understand now.
rat65
(IPCC student)
(87 Points)
Replied 02 March 2010
Thanks Mr. Anish for answering...
Could you please explain in detail as to how you got Rs.675000 as Net sales? A step by step answer will be greatly appreciated...
Thanks again,
Rat65
Vivek Angrish
(Manager Finance & Accounts)
(232 Points)
Replied 02 March 2010
Here is simple explanation
Trading Account
Particulars Amt. Particulars Amt.
Opening Stock 30000.00 Gross Sales - 695000.00
Purchases - 560000.00 (-) Return - 20000.00
(-) Return - 15000.00 Net Sales 675000.00
Net Purchases - 545000.00 Closing Stock 40000.00
Carriage Inward 5000.00
Gross Profit - Rs.135000/- (20% of Net Sales)
Total - 715000.00 7 15000.00
So your question asks about the gross sales and not the net sales, what you are calculating is the net sales and not the gross sales. May be this will be helpful to you.
So the Gross Sales for June 04 will be Rs.695000/- which is option (A)
rat65
(IPCC student)
(87 Points)
Replied 03 March 2010
Thanks Mr.Vivek for the answer,
How did you get Net sales?
See for this question, you might be aware of one formula which is--
Cost of goods sold(net)= Opening stock + Net purchases + direct exp. - closing stock
Substitute all values in the above formula,
Cost of goods sold(net) = 30000 + 545000 + 5000 - 40000
= INR 540000
Now question says profit is 20% of net sales which means profit is 1/5th of net sales. To be more clear , 1= profit and 5 = net sales in the above fraction...
So what is cost?
Cost = net sales - profit
= 5 - 1
= 4
Which we can say, that profit is 1/4th on cost of net sales...
So profit will be = 540000(cost of net sales) * 1/4th
= INR 135000
So now the Net sales will be = cost of net sales + profit
= 540000 +135000
Net sales = INR 675000
now gross sales will be = Net sales + returns
= 675000 + 20000
Gross sales = INR 695000
Hope you have understood
shakuntala chhangani
(FCA Course co-ordinator WIRC coaching centre)
(2525 Points)
Replied 26 April 2010
COGS = op stock + Net purchases + Carriage inwards - Closing stock
= 30,000 + (5,60,000 - 15,000) + 5,000 - 40,000
= 30,000 + 5,45,000 + 5,000 - 40,000
= 5,40,000
NET SALES = COGS + GP
given GP is 20% of Net sales
therefore, COGS is 80% of Net Sales
Net sales = 5,40,000/80% = Rs. 6,75,000
Gross sales - Return inwards = Net sales
therefore Gross sales = net sales + return inwards
= Rs. 6,75,000 + Rs. 20,000 = Rs. 6,95,000
Regards, CA Shakuntala Chhangani
rat65
(IPCC student)
(87 Points)
Replied 26 April 2010
Thank You both for answering.....
Problem solved
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