Question

From the following details, calculate Opening Inventory:
Closing Inventory Rs. 60,000, Total Revenue from Operations Rs. 5,00,000 (including cash revenue from operations Rs. 1,00,000), Total purchases Rs. 3,00,000 (including credit purchases Rs. 60,000). Goods are sold at a profit of 25% on cost.

Answer 1

Total Revenue from Operations = Rs. 5,00,000
Gross Profit = `(1)/(4)` on Cost = `(1)/(5)` on Sales*
`= (1)/(5) xx` Rs. 5,00,000 = Rs. 1,00,000
Cost of Revenue from Operations = Net Revenue from Operations - Gross Profit = Rs. 5,00,000 - Rs. 1,00,000 = Rs. 4,00,000
Cost of Revenue from Operations = Opening Inventory + Net Purchases - Closing inventory
Rs. 4,00,000 = Opening Inventory + Rs. 3,00,000 - Rs. 60,000
Opening Inventory = Rs. 1,60,000.
*Let Cost = Rs. 100, Gross Profit = Rs. 25, Revenue from Operations (Sales) = Rs. 125,
Gross Cost = Rs.25/Rs.100 = 1/4 on Cost or Gross Profit on Sales = Rs. 25/Rs.125 = 1/5 on Sales.