CBSE Class 11 Financial Accounting: Chapter 9 - Financial Statements – I Solutions

To calculate the gross profit, we need to prepare a Trading Account. The Trading Account shows the direct costs related to the production or purchase of goods and the revenue generated from their sale.

The formula for Gross Profit is:

$$Gross\; Profit\; =\; Net\; Sales\; -\; Cost\; of\; Goods\; Sold$$

First, let's calculate the Cost of Goods Sold (COGS):

$$COGS\; =\; Opening\; Stock\; +\; Net\; Purchases\; +\; Direct\; Expenses\; -\; Closing\; Stock$$

Substituting the given values:

$$COGS\; =\; 15,00,000\; +\; 15,00,000\; +\; 80,000\; -\; 2,50,000$$

$$COGS\; =\; 30,80,000\; -\; 2,50,000$$

$$COGS\; =\; 28,30,000$$

Now, we can calculate the Gross Profit:

$$Gross\; Profit\; =\; Net\; Sales\; -\; COGS$$

$$Gross\; Profit\; =\; 40,00,000\; -\; 28,30,000$$

$$Gross\; Profit\; =\; 11,70,000$$

Alternatively, we can present this in a Trading Account format:

Answer: The Gross Profit is Rs 11,70,000.

We need to calculate three key figures: Cost of Goods Available for Sale, Cost of Goods Sold, and Gross Profit.

1. Cost of Goods Available for Sale:

   This represents the total value of goods that were available to be sold during the period. It includes the opening inventory plus all purchases made during the period, adjusted for any direct expenses related to bringing those goods to a saleable condition.

   First, let's calculate Net Purchases:

   $$Net\; Purchases\; =\; Credit\; Purchases\; +\; Cash\; Purchases\; -\; Purchases\; Return$$

   $$Net\; Purchases\; =\; 7,50,000\; +\; 3,00,000\; -\; 10,000$$

   $$Net\; Purchases\; =\; 10,50,000\; -\; 10,000$$

   $$Net\; Purchases\; =\; 10,40,000$$

   Now, calculate the Cost of Goods Available for Sale:

   $$Cost\; of\; Goods\; Available\; for\; Sale\; =\; Opening\; Stock\; +\; Net\; Purchases\; +\; Wages$$

   Wages are considered a direct expense and are included here.

   $$Cost\; of\; Goods\; Available\; for\; Sale\; =\; 25,000\; +\; 10,40,000\; +\; 1,00,000$$

   $$Cost\; of\; Goods\; Available\; for\; Sale\; =\; 11,65,000$$

   Answer for (a): The Cost of Goods Available for Sale is Rs 11,65,000.

2. Cost of Goods Sold (COGS) during the year:

   COGS is the cost of the inventory that has been sold. It is calculated by deducting the closing stock from the cost of goods available for sale.

   $$COGS\; =\; Cost\; of\; Goods\; Available\; for\; Sale\; -\; Closing\; Stock$$

   $$COGS\; =\; 11,65,000\; -\; 30,000$$

   $$COGS\; =\; 11,35,000$$

   Alternatively, COGS can be calculated using Net Sales and Gross Profit. To do this, we first need to calculate Net Sales and Gross Profit.

   Net Sales = Gross Sales - Sales Return

   Gross Sales = Credit Sales + Cash Sales = 12,00,000 + 4,00,000 = 16,00,000

   Net Sales = 16,00,000 - 50,000 = 15,50,000

   Gross Profit = Net Sales - COGS. If we assume COGS is Rs 11,35,000, then Gross Profit = 15,50,000 - 11,35,000 = 4,15,000.

   This confirms the COGS calculation.

   Answer for (b): The Cost of Goods Sold during the year is Rs 11,35,000.

3. Gross Profit:

   Gross Profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. It is calculated as Net Sales minus Cost of Goods Sold.

   $$Gross\; Profit\; =\; Net\; Sales\; -\; Cost\; of\; Goods\; Sold$$

   We have already calculated Net Sales as Rs 15,50,000 and Cost of Goods Sold as Rs 11,35,000.

   $$Gross\; Profit\; =\; 15,50,000\; -\; 11,35,000$$

   $$Gross\; Profit\; =\; 4,15,000$$

   Salaries (Rs 1,40,000) are an indirect expense and are not included in the calculation of Gross Profit; they are deducted later in the Profit and Loss Account.

   Answer for (c): The Gross Profit is Rs 4,15,000.