Accountancy Part BAccounting Ratios

On the basis of information given below the closing Inventory will be…

On the basis of information given below the closing Inventory will be:

Opening inventory 20,000

Average inventory 40,000

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → ₹60,000

Average inventory is the simple average of opening and closing inventory, so closing inventory is found by working the formula backwards.

Average Inventory = (Opening Inventory + Closing Inventory) ÷ 2

40,000 = (20,000 + Closing Inventory) ÷ 2
20,000 + Closing Inventory = 80,000
Closing Inventory = 80,000 − 20,000 = ₹60,000

₹80,000 is the total of opening and closing inventory, not the closing figure.

NCERT (2026-27 edition):
Inventory Turnover Ratio – “… Where average inventory refers to arithmetic average of opening and closing inventory, and the cost of revenue from operations means revenue from operations less gross profit.”