From the following information, calculate opening inventory.
Revenue from Operations = 4,00,000
Gross Profit Ratio = 10%
Carriage outwards = 2,000
Closing Inventory = 75,000
Purchases of stock in trade = 3,50,000
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → ₹85,000
Gross profit = 10% of ₹4,00,000 = ₹40,000
Cost of revenue from operations = ₹4,00,000 − ₹40,000 = ₹3,60,000
Cost of revenue from operations = opening inventory + purchases − closing inventory (carriage outwards is a selling expense, not part of it)
Opening inventory = ₹3,60,000 − ₹3,50,000 + ₹75,000 = ₹85,000