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Question 69 Chapter 4 of +2-B
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IV. Profitability Ratios
69. (GP Ratio/NP Ratio/Stock T/O Ratio/Reasons for Variation in two years) The following is the statement of profit and loss of a Trader for the year ended 31st March 2019 with the corresponding figures for the previous year.
| Particulars | 2018 | 2019 | ||
| ₹ | ₹ | |||
| Revenue from Operations (Sales) | 6,00,000 | 7,48,000 | ||
| Less : Purchase | 4,80,000 | 5,84,000 | ||
| Changes in Inventories | -8,000 | 12,000 | ||
| (Opening Inventory — Closing Inventory) | ||||
| 2018 (₹ 1,25,000 —₹ 1,33,000) | ||||
| 2019 (₹ 1,33,000 — ₹ 1,21,000) | ||||
| Administrative Expenses | 38,000 | 38,000 | ||
| Selling Expenses | 22,500 | 29,290 | ||
| Other Expenses | 37,500 | 46,710 | ||
| Interest | – – – – | 5,70,000 | 4,000 | 7,14,000 |
| Net Profit | 30,000 | 34,000 |
Calculate the following ratios for both the years and indicate the possible reasons for variation of the ratios of the two years (1) Gross profit ratio (2) Net profit ratio (3) Stock turnover ratio.
The solution of Question 69 Chapter 4 of +2-B: –
| (1) Gross Profit Ratio | = | ₹ 1,28,000 | X | ₹ 2,00,000 |
| ₹ 6,00,000 | ||||
| = | 21.33% |
| (2) Net Profit Ratio | = | ₹ 30,000 | X | 8,00,000 |
| ₹ 6,00,000 | ||||
| = | 5% | |||
| Net Profit | = | Gross Profit – Indirect Expenses | ||
| = | ₹ 2,00,000 – ₹ 40,000 | |||
| = | ₹ 1,60,000 |
| (3) Stock Turnover Ratio | = | Cost of goods sold |
| Average Inventory | ||
| Cost of goods sold | = | Opening Inventory – Closing Inventory + Purchase |
| = | (₹ 8,000) + ₹ 4,80,000 | |
| = | ₹ 4,72,000 | |
| Average Inventory | = | Opening Inventory + Closing Inventory |
| 2 | ||
| = | ₹ 1,25,000 + ₹ 1,33,000 | |
| 2 | ||
| = | ₹ 1,29,000 | |
| Stock Turnover Ratio | = | ₹ 4,72,000 |
| ₹ 1,29,000 | ||
| = | 3.66 Times |
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| (1) Gross Profit Ratio | = | ₹ 1,52,000 | X | ₹ 2,00,000 |
| ₹ 7,48,000 | ||||
| = | 20.32% |
| (2) Net Profit Ratio | = | ₹ 34,000 | X | 8,00,000 |
| ₹ 7,48,000 | ||||
| = | 4.54% |
| (3) Stock Turnover Ratio | = | Cost of goods sold |
| Average Inventory | ||
| Cost of goods sold | = | Opening Inventory – Closing Inventory + Purchase |
| = | ₹ 12,000 + ₹ 5,84,000 | |
| = | ₹ 5,96,000 | |
| Average Inventory | = | Opening Inventory + Closing Inventory |
| 2 | ||
| = | ₹ 1,33,000 + ₹ 1,21,000 | |
| 2 | ||
| = | ₹ 1,27,000 | |
| Stock Turnover Ratio | = | ₹ 5,96,000 |
| ₹ 1,27,000 | ||
| = | 4.69 Times |
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Reason: Gross Profit Ratio and Net Profit Ratio both are decreased in 2019 from the previous year. This happened due to an increase in the cost of goods sold in 2019 like the percentage of sales and expenses are also increase.
Also, Check out the solved question of previous Chapters: –
Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution
- Chapter No. 1 – Accounting Not for Profit Organisations
- Chapter No. 2 – Partnership Accounts – I (Introduction)
- Chapter No. 3 – Partnership Accounts – II (Goodwill: Nature and Valuation)
- Chapter No. 4 – Partnership Accounts – III (Reconstitution of Partnership)
- Chapter No. 5 – Partnership Accounts – IV (Admission of A Partner)
- Chapter No. 6 – Partnership Accounts – V (Retirement and Death of A Partner)
- Chapter No. 7 – Partnership Accounts – VI (Dissolution of Partnership Firm)
- Chapter No. 8 – Company Accounts (Share Capital)
- Chapter No. 9 – Company Accounts (Issue of Debentures)
- Chapter No. 10 – Company Accounts (Redemption of Debentures)
Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis- Comparative and Common Size
- Chapter No. 4 – Ratio Analysis
- Chapter No. 5 – Cash Flow Statement
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
