Question

Question 6.
Mahesh who keeps his books on Single Entry System sells goods at Cost plus 50%. On 1st April, 2017 his Capital was ₹ 4,00,000 and on 31st March, 2018 it was ₹ 3,50,000. He had withdrawn ₹ 20,000 per month besides goods of the sale value of ₹ 60,000. How much did he earn in 2017-18?

Answer 1

Closing Stock              = 3,50,000

+ Drawing- Cash          =  2,40,000

                 - Goods       =      60,000

-  Opening Stock         =   4,00,000

Profit earned                =  2,50,000

Explanation:

Formula to Calculate Profit earned =

Closing Stock + Drawing - Opening Stock0

Answer 2

The amount of profit earned in the year 2017- 18 is Rs 230,000

Explanation:

The amount of profit earned in the year 2017- 18 is as:

Profit = Capital as on March 31, 2018 (Ending Capital) + Drawings - Capital as on April 1, 2017 (Beginning Capital)

where

Ending Capital is Rs 350,000

Beginning Capital is Rs 400,000

Drawings is Rs 280,000

Putting the values above:

Profit = Rs 350,000 + Rs 280,000 - Rs 350,000

= Rs 630,000 - Rs 400,000

= Rs 230,000

Working Note:

Computation of COGS:

Sales = COGS  + Gross Profit (GP)

Sales is 150

GP is 50

COGS 100

GP = 50/ 150

= 1/3

Sales = Rs 60,000 × 1/3

= Rs 20,000

COGS = Rs 60,000 - Rs 20,000

= Rs 40,000

So, Drawings is computed as:

Drawings = Cash + COGS

= Rs 240,000 + Rs 40,000

= Rs 280,000