ABC Ltd., a telecom company was passing through a bad phase of business cycle and banks were unwilling to lend further amount. It decided to do introspection and compiled following information for the purposes of analysis:
| PARTICULARS | AMOUNT (₹) |
| Total debts | 900000 |
| Preference share capital | 100000 |
| Shareholders funds | 200000 |
| Current liabilities | 400000 |
| Purchases | 90000 |
| Excess of opening inventory over closing inventory | 10000 |
| Aggregate of opening and closing inventory | 50000 |
What will be the cost of revenue from operations?
Answer & explanation
Correct answer: option 2
Cost of Revenue from Operations = Inventory in the beginning + Net Purchases – Inventory at the end
=30000 + 90000 - 20000
= ₹100000
Aggregate of opening and closing inventory ₹50000
Excess of opening inventory over closing inventory ₹10000
Let us assume opening inventory is x
So, closing inventory will 50000 - x
x- (50000-x) = 10000
x-50000 + x = 10000
2x= 60000
x= 30000
Closing inventory= 50000- 30000 = ₹20000
Opening inventory = 50000 - 20000 = ₹30000