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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
From the following information, calculate the Inventory Turnover Ratio:
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| Opening Inventory | 2,00,000 | Closing Inventory | 60,000 |
| Purchases | 4,60,000 | Wages | 30,000 |
| Carriage Inwards | 20,000 | Freight Outwards | 37,500 |
Cost of Revenue from Operations (Cost of Goods Sold) = Opening Inventory + Purchases + Carriage Inwards + Wages − Closing Inventory
= 2,00,000 + 4,60,000 + 20,000 + 30,000 − 60,000 = ₹6,50,000
Average Inventory = (Opening Inventory + Closing Inventory) ÷ 2 = (2,00,000 + 60,000) ÷ 2 = ₹1,30,000
Inventory Turnover Ratio = Cost of Revenue from Operations ÷ Average Inventory = 6,50,000 ÷ 1,30,000 = 5 times
Note: Freight Outwards is a selling/distribution expense, not a cost of acquiring inventory, so it is excluded from Cost of Goods Sold (unlike Carriage Inwards).
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "T.S. Grewal Class 12 Vol 3 Chapter 4 Q.82 - Accounting Ratios", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 4 - Accounting Ratios.
It is primarily curated for Class 11 and Class 12 high school commerce, accounting, and economics students, as well as aspirants preparing for board exams or CA Foundation.
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