Question

From the following information, calculate Gross Profit Ratio:

	₹			₹
Credit Sales	5,00,000		Decrease in Inventory	10,000
Purchases	3,00,000		Returns Outward	10,000
Carriage Inwards	10,000		Wages	50,000
			Rate of Credit Sale to Cash Sale	4:1

Answer 1

Credit Sale = Rs 5,00,000
Rate of Credit Sale to Cash Sale = 4:1

Cash Sale = `1/4 xx 500000` = Rs 125000

Total Sales = Cash Sales + Credit Sales = Rs 1,25,000 + Rs 5,00,000 = Rs 6,25,000
Cost of Goods Sold = Purchases – Return Outward + Carriage Inwards + Wages + Decrease in Inventory

= Rs 3,00,000 – Rs 10,000 + Rs 10,000 + Rs 50,000 + Rs 10,000
= Rs 3,60,000

Gross Profit = Total Sales – Cost of Goods Sold
= Rs 6,25,000 – Rs 3,60,000 = Rs 2,65,000

Gross Profit Ratio = `"Gross Profit"/"Net Sales" xx 100`

`= 265000/625000 xx 100 = 42.40%`