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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
From the following information, determine the Opening and Closing Inventories: Inventory Turnover Ratio 5 times, Total Sales ₹2,00,000, Gross Profit Ratio 25%. Closing Inventory is more by ₹4,000 than the Opening Inventory.
Gross Profit = 25% on Sales = 2,00,000 × 25 ÷ 100 = ₹50,000
Cost of Goods Sold = Sales − Gross Profit = 2,00,000 − 50,000 = ₹1,50,000
Average Stock = Cost of Goods Sold ÷ Inventory Turnover Ratio = 1,50,000 ÷ 5 = ₹30,000
Let Opening Inventory = x. Closing Inventory = x + 4,000.
Average Stock = (x + x + 4,000) ÷ 2
30,000 = (2x + 4,000) ÷ 2
60,000 = 2x + 4,000
x = ₹28,000 (Opening Inventory)
Closing Inventory = 28,000 + 4,000 = ₹32,000
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.93 - Accounting Ratios", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 4 - Accounting Ratios.
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