NAHTA PROFESSIONAL CLASSES M:8878819888 / 8518819888

CH - 8

VALUATION OF INVENTORIES

DANGAL QUESTIONS

ICAI RTP QUESTIONS ICAI PAST QUESTIONS TOTAL QUESTIONS

3 22 25

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Lets DANGAL with ICAI RTP QUESTIONS

MAY 18

Q1> Closing stock is valued by XYZ Stores on generally accepted accounting principles.

Stock taking for the year ended 31st March, 2017 was completed by 10th April, 2017, the valuation of

which showed a stock figure of Rs. 1,67,500 at cost as on the completion date. After the end of the

accounting year and till the date of completion of stock taking, sales for the next year were made for Rs.

6,875, profit margin being 33.33 percent on cost. Purchases for the next year included in the stock

amounted to Rs. 9,000 at cost less trade discount 10 percent. During this period, goods were added to

stock of the mark up price of Rs. 300 in respect of sales returns. After stock taking it was found that

there were certain very old slow moving items costing Rs. 1,125 which should be taken at Rs. 525 to

ensure disposal to an interested customer. Due to heavy floods, certain goods costing Rs. 1,550 were

received from the supplier beyond the delivery date of customer. As a result, the customer refused to

take delivery and net realizable value of the goods was estimated to be Rs. 1,250 on 31st March, 2017.

You are required to calculate the value of stock for inclusion in the final accounts for the year ended

31st March, 2017.

ANS. Statement showing the valuation of stock as on 31st March, 2017

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Note: Profit margin of 33.33 percent on cost means 25 percent on sale price.

MAY 2019

Q2> A trader prepared his accounts on 31st March, each year. Due to some unavoidable reasons, no stock

taking could be possible till 15th April, 2018 on which date the total cost of goods in his godown came

to Rs. 50,000. The following facts were established between 31st March and 15th April, 2018.

(i) Sales Rs. 41,000 (including cash sales Rs. 10,000)

(ii) Purchases Rs. 5,034 (including cash purchases Rs. 1,990)

(iii) Sales Return Rs. 1,000.

(iv) On 15th March, goods of the sale value of Rs. 10,000 were sent on sale or return basis to a customer,

the period of approval being four weeks. He returned 40% of the goods on 10th April, approving the rest;

the customer was billed on 16th April.

(v) The trader had also received goods costing Rs. 8,000 in March, for sale on consignment basis; 20%

of the goods had been sold by 31st March, and another 50% by the 15th April. These sales are not

included in above sales.

Goods are sold by the trader at a profit of 20% on sales.

You are required to ascertain the value of Inventory as on 31st March, 2018.

ANS. Statement of Valuation of Stock on 31st March, 2018

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MAY 2020

Q3> Sky Ltd. keeps no stock records but a physical inventory of stock is made at the end of each quarter

and the valuation is taken at cost. The company’s year ends on 31st March, 2018 and their accounts

have been prepared to that date. The stock valuation taken on 31st March, 2018 was however, misleading

and you have been advised to value the closing stocks as on 31st March, 2018 with the stock figure as

on 31st December, 2017 and some other information is available to you:

(i) The cost of stock on 31st December, 2017 as shown by the inventory sheet was Rs. 80,000.

(ii) On 31st December, stock sheet showed the following discrepancies:

a) A page total of Rs. 5,000 had been carried to summary sheet as Rs. 6,000.

(b) The total of a page had been undercast by Rs. 200.

(iii) Invoice of purchases entered in the Purchase Book during the quarter from January to March, 2018

totalled Rs. 70,000. Out of this Rs. 3,000 related to goods received prior to 31st December, 2017. Invoices

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entered in April 2018 relating to goods received in March, 2018 totalled Rs. 4,000.

(iv) Sales invoiced to customers totalled Rs. 90,000 from January to March, 2018. Of this Rs. 5,000

related to goods dispatched before 31st December, 2017. Goods dispatched to customers before 31st

March, 2018 but invoiced in April, 2018 totalled Rs. 4,000.

v) During the final quarter, credit notes at invoiced value of Rs. 1,000 had been issued to customers in

respect of goods returned during that period. The gross margin earned by the company is 25% of cost.

You are required to prepare a statement showing the amount of stock at cost as on 31st March, 2018.

Transfer of ownership takes place at the time of delivery of goods.

ANS. Valuation of Physical Stock as at March 31, 2018

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Let’s DANGAL with ICAI PAST EXAMS QUESTIONS

Q1> A company, started on April 1,2017 purchased raw material during 2017-2018 as stated below:

April 2 800 kg @ Rs. 62 per kg

May 26 1,200 kg @ Rs. 57 per kg
July 13 2,500 kg @ Rs. 59 per kg
Oct. 10 3,000 kg @ Rs. 56 per kg
Dec. 18 1,500 kg @ Rs. 60 per kg
Feb. 29 1,000 kg @ Rs. 65 per kg

While preparing its final accounts on March 31, 2018 the company had 1,300 kg of raw material in its

godown.

Calculate the values of closing stock of raw materials according to—

(i) ‘First in First Out’ basis,(ii) ‘Last in First Out’ basis, and

(iii) ‘Weighted Average’ basis.

Sol : VALUATION OF CLOSING STOCK

Particulars Rs.
I. On FIFO basis 65,000
1,000 kg @ Rs. 65 per kg 18,000
300 kg @ Rs. 60 per kg 83,000
Value of Closing Stock
II. On LIFO basis
800 kg @ Rs. 62 per kg 49,600
500 kg @ Rs. 57 per kg 28,500
Value of Closing Stock 78,100

III. On Weighted Average basis

Weighted Average Cost is computed as under:
Date of Purchase Price Rs. Quantity Price × Quantity Rs.
Apr. 2, 2017 62 800 49,600
May 26, 2017 57 1,200 68,400
July 13, 2017 59 2,500 1,47,500

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Oct. 10, 2017 56 3,000 1,68,000

Dec. 18, 2017 60 1,500 90,000
Feb. 29, 2018 65 1,000 65,000
10,000 5,88,500

Weighted Average Price = 5,88,500/10,000 = Rs. 58.85 Kg

Value of Closing Stock, viz., 1,300 Kg = 1,300 x Rs. 58.85 = Rs. 76,505

Q2> A firm dealing in cloth has 30,000 meters of cloths on 1st April, 2017 valued at Rs. 3,00,000 on LIFO

method. It purchased 40,000 metre during the period ending 31st March, 2018 at the rate of Rs. 12 per

metre and sold during the same period 60,000 meters @ Rs. 25 per metre. Ascertain the profit of the

firm during the period ending on 31st March, 2018, the closing stock to be value on LIFO method. Give

workings.

Sol: DR. TRADING ACCOUNT CR.

Particulars Rs. Particulars Rs.
To Opening Stock (30000 x ?10) 3,00,000 By Sales (60000 x ?25) 15,00,000
To Purchases (40000 x ?12) 4,80,000 By Closing Stock (10000 x Rs.10) 1,00,000
To Gross Profit 8,20,000 [30000 + 40000 – 60000]
16,00,000 16,00,000

Q3> In pricing the petrol sold, service station X follows FIFO while service station Y follows LIFO. On April 1 st

2018 both had the same quantity of petrol in stock, viz. 8,000 litres at Rs. 25 per litre. During April

each station purchased additional supplies of 3,000 litres at Rs. 26 per litre. Sales for each of these

stations during the month were 10,000 liters at Rs. 27 per litre. Calculate for each service station the

profit earned during the month and the value of petrol in stock at the end of the month.

Sol :

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SERVICE STATION X (USING FIFO METHOD)

Particulars Rs.
A. Opening Stock 8,000 litres @ Rs. 25 2,00,000
B. Purchases 3,000 litres @ Rs. 26 78,000
C. Less: Value of Closing Stock: [1,000 litres @ Rs. 26] (26,000)
D. Cost of Sales [A + B – C] 2,52,000
E. Sales 10,000 litres @ Rs. 27 2,70,000
F. Profit during April [E – D] 18,000

SERVICE STATION Y (USING LIFO METHOD)

Particulars Rs.
A. Opening Stock 8,000 litres @ Rs. 25 2,00,000
B. Purchases 3,000 litres @ Rs. 26 78,000
C. Less: Value of Closing Stock: [1,000 litres @ Rs. 25] (25,000)
D. Cost of Sales [A + B – C] 2,53,000
E. Sales: 10,000 litres @ Rs. 27 2,70,000
F. Profit during April [E – D] 17,000

Q4> Calculate Cost of Goods Sold, Value of Closing Stock and Profit under LIFO method of stock valuation

from the following information:

December 30, 2017 Stock 200 units at Rs. 6 each

January 16, 2018 Bought 240 units at Rs. 8 each

February 3, 2018 Bought 220 units at Rs. 10 each

February 21,2018 Bought 280 units at Rs. 12 each

During March, 2018, 800 units were sold at Rs. 16 each

Sol: STORES LEDGER (ACCORDING TO LIFO METHOD)

Reciepts Sales Balance
Date Unit Cost Amount Unit Cost Amount Unit Cost Amount
2017
Dec 30 — 200 6 1,200
2018 200 6 1,200

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Jan 16 240 8 1,920 — 240 8 1,920

200 6 1,200
Feb 3 220 10 2,200 240 8 1,920
220 10 2,200
Feb 21 280 12 3,360 200 6 1,200
240 8 1,920
220 10 2,200
280 12 3,360
March 280 12 3,360
220 10 2,200
240 8 1,920
60 6 360 140 6 840
7,480 7,840

1. Cost of Goods Sold = Rs. 7,840 (i.e. Rs. 3,360 + 2,200 + 1,920 + 360)

2. Stock at the end = Rs. 840

3. Profit = Sales – Cost of Goods Sold

= (800 x Rs. 16) – (Rs. 3,360 + Rs. 2,200 + Rs. 1,920 + Rs. 360) = Rs. 12,800 – Rs. 7,840

= Rs. 4,960

Q5> The following are the details of a spare part of Sriram Mills:

01.01.2018 Opening stock Nil

01.01.2018 Purchases 100 units @ Rs. 30 per unit
15.01.2018 Issued for consumption 50 units
01.02.2018 Purchases 200 units @ Rs. 40 per unit
15.02.2018 Issued for consumption 100 units
20.02.2018 Issued for consumption 100 units
01.03.2018 Purchases 150 units @ Rs. 50 per unit
15.03.2018 Issued for consumption 100 units

Required: Find out the Value of Stock as on 31.03.2018 if the company follows: (a) First in First Out

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basis; (b) Last in First Out basis; (c) Weighted Average basis.

Sol: (I) STOCK LEDGER (ON FIFO BASIS)

Date Receipts Sales Balance
Quantity Rate Amount Quantity Rate Amount Quantity Rate Amount
01.01.2018 Balance Nil
01.01.2018 100 30 3,000 100 30 3,000
15.01.2018 50 30 1,500 50 30 1,500
01.02.2018 200 40 8,000 50 30 1,500
200 40 8,000
15.02.2018 50 30 1,500
50 40 2,000 150 40 6,000
20.02.2018 100 40 4,0 00 50 40 2,000
01.03.2018 150 50 7,500 50 40 2,000
150 50 7,500
15.03.2018 50 40 2,000
50 50 2,500 100 50 5,000

Therefore, the Value of Stock as on 31.3.2018: 100 units @ Rs. 50 = Rs. 5,000.

(B) STOCK LEDGER (ON LIFO BASIS)

Date Receipts Sales Balance

Quantity Rate Amount Quantity Rate Amount Quantity Rate Amount

01.01.2018 Balance Nil

01.01.2018 100 30 3,000 100 30 3,000
15.01.2018 50 30 1,500 50 30 1,500
01.02.2018 200 40 8,000 50 30 1,500
200 40 8,000
15.02.2018 100 40 4,000 50 30 1,500
100 40 4,000
20.02.2018 100 40 4,000 50 30 1,500
01.03.2018 150 50 7,500 50 30 1,500
150 50 7,500
15.03.2018 100 50 5,000 50 30 1,500
50 50 2,500

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Therefore, the Value of Stock as on 31.3.2018

= [50 units @ Rs. 30 + 50 units @ Rs. 50] = Rs. 4,000

© STOCK LEDGER (ON WEIGHTED AVERAGE BASIS)

Date Receipts Sales Balance
Quantity Rate Amount Quantity Rate Amount Quantity Rate Amount
Rs. Rs. Rs. Rs. Rs. Rs.
01.01.2018 Balance Nil
01.01.2018 100 30 3,000 100 30 3,000
15.01.2018 50 30 1,500 50 30 1,500
01.02.2018 200 40 8,000 250 38 9,500
15.02.2018 100 38 3,800 150 38 5,700
20.02.2018 100 38 3,800 50 38 1,900
01.03.2018 150 50 7,500 200 47 9,400
15.03.2018 100 47 4,700 100 47 4,700

Therefore, the Value of Stock as on 31.3.2018

= 100 units @ Rs. 47 = Rs. 4,700.

Q6> Navkar Ltd. Was following LIFO method of valuation of stock. Due to promulgation of revised accounting

standard, they want to switch over to FIFO method. From the following information:

(i) Draw up stock ledgers under FIFO and LIFO methods of valuation of stocks.

(ii) Find out the closing stock and cost of materials consumed under each of the above two methods:

Opening Stock: 5,000 MT @ Rs. 22 per MT Rs. 1,10,000

Purchases:
1.6.2018 1,000 MT @ Rs. 30 per MT
5.6.2018 2,000 MT @ Rs. 35 per MT
10.6.2018 1,500 MT @ Rs. 38 per MT
15.6.2018 1,500 MT @ Rs. 35 per MT
20.6.2018 2,000 MT @ Rs. 32 per MT
25.6.2018 2,000 MT @ Rs. 35 per MT

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30.6.2018 1,500 MT @ Rs. 30 per MT

Issues:
1-5.6.2018 2,000 MT
6-10.6.2018 3,000 MT
11-20.6.2018 4,000 MT
21-25.6.2018 3,000 MT
26-30.6.2018 3,000 MT

Sol: STOCK LEDGER (ON FIFO BASIS)

Purchases Sales Balance
Date Quantity Rate Amount Quantity Rate Amount Quantity Rate Amount
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
2018 Op. Bal. 5,000 22 1,10,000
June 1 1,000 30 30,000 5,000 22 1,10,000
1,000 30 30,000
June 1-5 2,000 22 44,000 3,000 22 66,000
1,000 30 30,000
June 5 2,000 35 70,000 3,000 22 66,000
1,000 30 30,000
2,000 35 70,000
June 6-10 3,000 22 66,000 1,000 30 30,000
2,000 35 70,000
June 10 1,500 38 57,000 1,000 30 30,000
2,000 35 70,000
1,500 38 57,000
June 15 1,500 35 52,500 1,000 30 30,000
2,000 35 70,000
1,500 38 57,000
1,500 35 52,500
June 11-20 1,000 30 30,000
2,000 35 70,000
1,000 38 38,000 500 38 19,000
1,500 35 52,500
June 20 2000 32 64,000 500 38 19,000
1,500 35 52,500
2,000 32 64,000

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June 21-25 500 38 19,000

1,500 35 52,500
1,000 32 32,000 1,000 32 32,000
June 25 2,000 35 70,000 1,000 32 32,000
2,000 35 70,000
June 26-30 1,000 32 32,000
2,000 35 70,000 — — —
June 30 1500 30 45,000 1,500 30 45,000
Total 3,88,500 4,53,500

Particulars FIFO LIFO

Closing Stock Rs. 45,000 Rs. 45,000
Cost of Materials Consumed Rs. 4,53,500 Rs. 4,53,500

Assumption: In case of purchases and issues of goods on the same day, it has been assumed that the

issues were made before making purchases.

Q7> From the following data, find out value of inventory as on 30th April using (a) LIFO method, and (b)

Weighted Average Method:

1. 1st April Purchased 10 units @ Rs.70 per unit

2. 6th April Sold 5 units @ Rs.90 per unit
3. 9th April Purchased 20 units @ Rs.75 per unit
4. 18th April Sold 14 units @Rs.100 per unit

Sol: (A) VALUATION OF CLOSING INVENTORY BY LIFO METHOD

Date Receipts Issue Balance
Unit Cost/unit Amount Unit Cost/unit Amount Unit Cost/unit Amount
Apr. 1 10 70 700 10 70 700
Apr. 6 5 70 350 5 70 350
Apr. 9 20 75 1500 5 70 350
20 75 1500
Apr. 18 14 75 1,050 5 70 350
6 75 450

Value of Closing Inventory as per LIFO Method = (4 units x Rs. 70) + (6 units x Rs. 75) = Rs. 730

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(B) VALUATION OF CLOSING INVENTORY BY WEIGHTED AVERAGE METHOD

Date Receipts Issue Balance
Unit Cost/unit Amount Unit Cost/unit Amount Unit Cost/unit Amount
Apr. 1 10 70 700 10 70 700
Apr. 6 5 70 350 5 70 350
Apr. 9 20 75 1500 25 74 1850
Apr. 18 14 74 1,036 11 74 814
Value of Closing Inventory as per WEIGHTED AVERAGE Method: = Rs. 814

Q8> HP is a leading distributor of petrol. A detail inventory of petrol in hand is taken when the books are

closed at the end of each month. At the end of month following information is available:

Sales: Rs. 47,25,000

General overheads cost Rs. 1,25,000

Inventory at beginning 1,00,000 litres @ Rs. 15 per litre

Purchases:

June 1 two lakh litres @ Rs. 14.25June 30 one lakh litres @ Rs. 15.15

Closing inventory 1.30 lakh litres

Compute the following by the FIFO as per AS 2:

(i) Value of Inventory on June, 30.(ii) Amount of cost of goods sold for June.

(iii) Profit/Loss for the month of June

Sol: (i) Cost of closing inventory for 1,30,000 litres as on 30th June Rs.
1,00,000 litres @ Rs. 15.15 15,15,000
30,000 litres @ Rs. 14.25 4,27,500
Total 19,42,500
(ii) Calculation of Cost of Goods Sold Rs.
Opening inventories (1,00,000 litres@ Rs. 15) 15,00,000
Purchases: June-1 (2,00,000 litres @ Rs. 14.25) 28,50,000
June-30 (1,00,000 litres @ Rs. 15.15) 15,15,000
58,65,000

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Less: Closing inventories 19,42,500

Cost of goods sold 39,22,000
(iii) Profit = Rs. 47,25,000 –(Rs. 39,22,500 + Rs. 1,25,000) = Rs. 6,77,500

Q9> Unsold units with Agent 1,000

Cost per unit Rs. 10
Estimated Selling Price per unit as at Balance Sheet Date Rs. 8
Agent’s Commission on Sales 5%
What should be the Value of Closing Stock?
SOLUTION:
I. Cost of Closing Stock (1,000 x Rs. 10) Rs. 10,000
II. Net Realizable Value
A. Total Realizable Value (1,000 x Rs. 8) Rs. 8,000
B. Less: Realizable Expenses (here agent’s commission is realizable expense) (Rs. 8,000 x 5/100) Rs. 400
C. Net Realizable Value (A – B) Rs. 7,600
III. Valuation since out of cost (which is Rs. 10,000 as calculated above) and NRV (which is Rs. 7,600), NRV is lower, the
said unsold stock should be valued at Rs. 7,600.

Q10> Best Ltd. Deals in five products, P, Q, R, S, and T which are neither similar nor interchangeable. At the

time of closing of its accounts for the year ending 31st March 2018, the historical cost and net

realizablevalue of the items of the dosing stock are determined as follows:

Items Historical Cost Net Realizable Value

P 5,70,000 4,75,000
Q 9,80,000 10,32,000
R 3,16,000 2,89,000
S 4,25,000 4,25,000
T 1,60,000 2,15,000

What will be the value of closing stock as at 31st March 2018 as per AS 2 “Valuation of Inventories”?

Sol: As per para 5 of AS 2 “Valuation of Inventories, inventories should be valued at the lower of cost and

net realizable value.Inventories should be written down to net realizable value on an item-by-item basis.

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VALUATION OF INVENTORY (ITEM WISE) AS AT 31 ST MARCH 2018

Item Historical Cost Net realizable value Valuation of closing stock
P 5,70,000 4,75,000 4,75,000
Q 9,80,000 10,32,000 9,80,000
R 3,16,000 2,89,000 2,89,000
S 4,25,000 4,25,000 4,25,000
T 1,60,000 2,15,000 1,60,000
23,29,000

The value of inventory as at 31st March 2018 = Rs. 23,29,000.

Q11> X who was closing his books on 31.3.2018 failed to take the actual Stock which he did only on 9 th April,

when it was ascertained by him to be worth Rs. 25,000.

It was found that sales are entered in the sales book on the same day of dispatch and return inwards

in the returns book as and when the goods are received back. Purchases are entered in the purchases

daybook once the invoices are received.

It was found that sales between 31st March and 9th April as per the sales day book are Rs. 1,720.

Purchases between 31st March and 9th April as per purchases day book are Rs. 120, out of these goods

amounting to Rs. 50 were not received until after the stock was taken.

Goods invoiced during the month of March, but goods received only on 4th April, amounted to Rs. 100.

Rate of gross profit is 33-1/3% on cost.

Required: Ascertain the value of physical stock as on 31.3.2018

Sol: STATEMENT OF VALUATION OF PHYSICAL STOCK AS ON 31ST MARCH, 2018

Particulars Rs.
A Value of Stock as on 9th April 25,000
B Add:Cost of Sales during the intervening period [ Rs. 1,720 x 25%] 1,290
C Less:Purchases actually received during the interveningperiod [ Rs. 120 – Rs. 50] 70
D Less:Purchases during March received on 4th April 100
E Value of Physical Stock as on 31st March (A + B – C – D) 26,120

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Q12> Mr Vijay’s financial year ends on 31st March 2018, but actual stock is not taken until the following 8th

April when it is ascertained at Rs. 7,425.

You find that:

(a) Sales are entered in the sales book on the same day as dispatched and returns inward in the return

inward book the day the goods are received back.

(b)Purchases are entered in the purchases day book as the invoices are received.

(c) Sales between 31st March and 8th April as per the sales day book and cash book are Rs. 8,600.

(d)Purchases between 31st March and 8th April as per the purchases day book are Rs. 660 but, of these

goods amounting to Rs. 60 are not received until after the stock was taken.

(e) Goods invoiced during the March (before 30th March) but not received until after 30th March

amounted to Rs. 500 of which Rs. 350 worth are received between 31st March and 8th April.

(f) Rate of Gross Profit is 33.33% on cost.Ascertain the value of Stock on 31st March, 2018

Sol: STATEMENT SHOWING COMPUTATION OF STOCK AS ON 31st MARCH, 2018

Particulars Rs.
A Stock as on 8thApril 7,425
B Add:Cost of goods sold after 31, March [75% of Rs. 8,600] 6,450
C Less:Cost of goods purchased & received after 31st March [ Rs. 660 – Rs. 60] 600
D Add:Purchases invoiced before 31st March, not received
upto 8thApril (Rs. 500 – Rs. 350) 150
E Stock as on 31st March 13,425

Q14> Determine the value of stock to be taken for Balance Sheet as on 31 st March, 2018 from the following

information:

(a) Purchases Rs. 50,000, of this, goods worth Rs. 20,000 were delivered on 5th April.

The stock was physically verified on 23rd March, and was valued at Rs. 6,00,000. Between 23rd March,

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and 31st March, the following transactions had taken place:

(b) Out of goods sent on consignment, goods worth Rs. 30,000 (at cost) were unsold.

(c) Sales were Rs. 1,70,000. These includes goods worth Rs. 40,000 sent on approval. Half of these were

returned before 31st March, as regards remaining, no information is received. Option period is 2 weeks.

(d)Normally firm sells goods on cost + 25%. However, one lot of goods costing Rs. 30,000 was sold for

Rs. 15,000.

Sol: STATEMENT SHOWING THE VALUATION OF STOCK AS ON 31 ST MARCH, 2018

Particulars Rs.
A Physical Stock as on 23rd March 6,00,000
B Add: (a) Cost of Goods purchased after stock taking till 31st March
Goods received 30,000
Goods in transit 20,000
(b) Cost of Stock on Consignment 30,000 80,000
C Less: Cost of Goods sold after stock taking till 31 st March
(a) Cost of Normal Sales (80% of Rs. 1,15,000) 92,000
(b) Cost of Abnormal Sales 30,000 (1,22,000)
D Stock as on 31st March (A + B – C) 5,58,000

Working Note: Calculation of Normal Sales Rs.

A Actual Sales (given) 1,70,000
B Less (a) Sale of Abnormal Items 15,000
(b) Goods sent on approval basis 40,000
C Normal Sales (A – B) 1,15,000

Note: Since the stock given on 23rd March already includes the cost of goods sent on approval basis,

no adjustment is required in this respect. It is assumed that Goods are being sold after 23rd March

Q15> Following information are available from the books of accounts of AB and Co. for the year 2017-2018:

Rs.
Purchases during the year 28,200

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Stock on 1-4-2017 5,960

Sales during the year 31,610

At the time of valuation of stock for 2016-2017, a part of the stock costing Rs. 1,800 was recorded

in the books for Rs. 1,560; one-third of these goods were sold during the year for Rs. 610.

Required: Find out the value of the stock as on 31st March 2018 assuming that firm makes 25%

profit on cost.

Sol: STATEMENT SHOWING THE VALUE OF STOCK AS ON 31st MARCH 2018

Particulars Normal Item Abnormal Item Total

Rs. Rs. Rs.
A Opening Stock 4,400 1,560 5,960
B Purchases 28,200 — 28,200
C Cost of goods available for sale (A + B) 32,600 1,560 34,160
D Less:Cost of goods sold:
Normal [80% of Rs. 31,610 – Rs. 610 ] Abnormal [1/3 of Rs. 24,800 520 25,320
1,560]
E Value of Closing Stock 7,800 1,040 8,840

Thus, Book value of Closing Stock Rs. 8,840.

Q16> From the following information, ascertain the value of stock as on 31.3.2018: Rs.
Value of Stock on 1.4.2017 70,000
Purchases during the period from 1.4.2017 to 31.3.2018 3,46,000
Manufacturing expenses during the above period 70,000
Sales during the same period 5,22,000

At the time of valuing stock on 31.3.2017, a sum of Rs. 6,000 was written off a particular item which

was originally purchased for Rs. 20,000 and was sold for Rs. 16,000. But for the other transactions

the gross profit earned during the year was 25% on cost.

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Sol: STATEMENT SHOWING THE VALUATION OF CLOSING STOCK AS AT 31ST MARCH, 2018
Particulars Rs. Rs.
A Normal Sales [ Rs. 5,22,000 - Rs. 16,000] 5,06,000
B Less:Gross Profit @ 20% on Sales 1,01,200
C Cost of Goods sold 4,04,800
D Less:Opening Stock of Normal Goods [ Rs. 70,000 - Rs. 14,000] 56,000
Purchases 3,46,000
Manufacturing Expenses 70,000 4,72,000
E Value of Stock as on 31.3.2018 67,200

Q17> From the following information ascertain the value of stock as on 31st March, 2018 and also the

profit for the year:

Stock as on 1.4.2017 Rs. 14,250 Administrative Expenses Rs. 3,000

Purchases Rs. 76,250 Financial Charges Rs. 2,150
Manufacturing Expenses Rs. 15,000 Sales Rs. 1,24,500
Selling Expenses Rs. 6,050

At the time of valuing stock as on 31st March, 2017, a sum of Rs. 1,750 was written off on a particular

item, which was originally purchased for Rs. 5,000 and was sold during the year at Rs. 4,500. Barring

the transaction relating to this item, the gross profit earned during the year was 20 percent on sales.

Sol: STATEMENT OF VALUATION OF STOCK AS ON 31 ST MARCH, 2018

Particulars Rs. Rs.

A.. Stock as on 1st April, 2017 14,250

B. Less: Book value of abnormal stock (Rs. 5,000 – 1,750) 3,250 11,000

C. Add: Purchases 76,250

Manufacturing Expenses 15,000

1,02,250

D Less: Cost of Normal Sales:[80% (1,24,500 – 4,500)] 96,000

E Stock as on 31st March, 2018 6,250

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STATEMENT SHOWING NET PROFIT FOR THE YEAR

Particulars Rs. Rs.
A. Gross Profit on Normal Sales 24,000
B. Add:Profit on abnormal item] 4,500 – 3,250] 1,250
C. Less:Overhead Expenses:
Selling Expenses 6,050
Administrative Expenses 3,000
Financial Charges 2,150 11,200
D. Net Profit 14,050

Q18> The Profit and Loss Account of Hanuman showed a net profit of Rs. 60,000, after considering the

closing stock of Rs. 37,500 on 31st March, 2018. Subsequently the following information was

obtained from scrutiny of the books:

(i) Purchases for the year included Rs. 1,500 paid for new electric fittings for the shop.

(ii)Hanuman gave away goods valued at Rs. 4,000 as free samples for which no entry was made in

the books of accounts.

(iii) Invoices for goods amounting to Rs. 25,000 have been entered on 27th March, but the goods

were not included in stock.

(iv) In March, goods of Rs. 20,000 sold and delivered were taken in the Sales for April, 2018.

(v) Goods costing Rs. 7,500 were sent on sale or return in March, 2018 at a margin of profit of 33.33

% on cost. Though approval was given in April, these were taken as sales for March.

Required: Calculate the value of stock on 31st March, 2018 and the Adjusted Net Profit for the

year ended on that date.

Sol: STATEMENT SHOWING THE VALUATION OF STOCK AS AT 31 ST MARCH, 2018

Particulars Rs.
A Stock as already stated 37,500

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B Add: Purchases not included 25,000

C Add: Cost of Goods sent on approval 7,500
D Stock as on 31 st March 2018 70,000
DR. PROFIT & LOSS ADJUSTMENT ACCOUNT CR.
Particulars Rs. Particulars Rs.
To Customer’s A/c 10,000 By Profit as per P & L A/c 60,000
(Selling Price of Goods sent By Fixtures & Fittings A/c 1,500
on approval) By Closing Stock (in transit) A/c 25,000
To Net Profit for the year 1,04,000 By Customer’s A/c 20,000
By Closing Stock with customer
(on approval) 7,500
1,14,000 1,14,000

Note: Since the rectifying entry in case of free samples involves both the revenue accounts (i.e.

Advertisement A/c and Purchases Ale). Profit & Loss Adjustment A/c is to be debited as well as

Credited and hence not shown in the above account.

Q19> The Profit and Loss Account of Cardamom for the year ended 31st March, 2018 showed a net profit of

Rs. 2,800 after taking into account the closing stock of Rs. 4,720.

On a scrutiny of the books the following information could be obtained:

(a) Cardamom has taken goods valued Rs. 1,500 for his personal use without making entry in the books.

(b) Purchases of the year included Rs. 600 spent on acquisition of a ceiling fan for his shop.

(c) Invoices for goods amounting to Rs. 4,000 have been entered on 29th March, but such goods were

Not included in stock.

(d) Rs. 500 have been included in closing stock in respect of goods purchased and invoiced on 28th

March, but included in purchase for April 2018.

(e) Sale of goods amounting to Rs. 610 sold and delivered in March, had been entered in April sales.

Required: Ascertain the correct amount of closing stock as on 31st March, 2018 and the adjusted net

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profit for the year ended on that date

Sol: STATEMENT SHOWING THE VALUATION OF STOCK AS AT 31 ST MARCH 2018

Particulars Rs.
A. Stock as already stated Rs. 4,720
B. Add: Purchases not included Rs. 4,000
C. Stock as on 31st March Rs. 8,720

DR. PROFIT AND LOSS ADJUSTMENT ACCOUNT CR.

Particulars Rs. Particulars Rs.
To Suppliers A/c 500 By Profit as per P&L A/c 2,800
To Net Profit for the year 9,010 By Drawings A/c (Goods taken for domestic use) 1,500
By Fixture and Fittings A/c (Ceiling fan) (b) 600
By Closing Stock A/c (In transit) 4,000
By Customer’s A/c (e) 610
9,510 9,510

Q20> FY Ltd. Conducts physical stock taking every year at the end of the accounting year. Due to certain

difficulties, it was not possible for it to conduct physical stock taking at the end of the accounting year

ending on 31 March, 2018. Physical stock was taken on 7th April when it was valued at Rs. 34,500.

The following transactions took place during 1st April to 7th April.

(a) Sales during the period were Rs. 9,340. These goods were sold at the usual rate of gross profit 25%

on cost except goods which realized Rs. 840 on the basis of 20% profit on cost.

(b) Purchases during the period were Rs. 7,500, of which Rs. 800 worth of goods were delivered to the

company on 10th April.

(c) Sales returns during the period were 11,500, of which 50% were out of the sales at 20% gross profit

mentioned above.

(d) On 5th April, goods worth Rs. 4,000 were received, which were to be sold on consignment basis.

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Required: Prepare a statement showing clearly the value of the stock to be taken into account in FY

Ltd.’s final accounts for the year ended 31st March, 2018

Sol: STATEMENT SHOWING THE VALUATION OF STOCK AS AT 31 ST MARCH 2018

Particulars Rs.
A. Physical Stock as at 7th April 34,500
B. Add: Cost of Sales after 31st March (Rs. 6,800 + Rs. 700) 7,500
C. Less: Cost of goods purchased & received after 31 st March (Rs. 7,500 – Rs. 800) (6,700)
D. Less: Cost of Sales returns after 31st March (Rs. 600 + Rs. 625) (1,225)
E. Less:Consignment Stock (4,000)
F. Value of Stock as at 31st March 30,075

Q21> SG Ltd. closes its books on 31st March each year. In the beginning of March 2018 because of a proposal

for sale of business (which later fell through), the firm carried out stock taking on 10th March. The

figure of stock was established as Rs. 62,500 (cost) as on that date. The firm decided not to carry out

any stock taking on 31st March, 2018. From the information given below, arrive at the stock as on that

date:

(a) Sales from 11th March to 31st March totalled Rs. 43,200 including Rs. 3,000 sale of goods which had

cost Rs. 3,600. The firm’s mark up on cost is 25%.

(b) Purchases during the same period totalled Rs. 29,200.

(c) Sales returns and purchase returns were respectively Rs. 2,200 and Rs. 1,200 in this period.

(d)Goods with customers on sale or return basis were Rs. 10,000 (proforma invoice value). The goods

Had been sent on 9th March the customers had the right of returning the goods within four weeks but

it was known that one customer who had goods worth Rs. 4,000 had pledged them with a bank.

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Sol: STATEMENT SHOWING THE VALUATION OF STOCK AS AT 31st MARCH 2018

Particulars Rs.
A. Physical Stock as at 10th March 62,500
B. Less: Cost of Sales (Rs. 32,160 +13,600) (35,600)
C. Add: Cost of Purchases 29,200
D. Add: Cost of Sales Returns (80% of Rs. 2,200) 1,760
E. Less: Cost of Purchase Returns (1,200)
F. Add: Cost of goods sent on approval [(80% of (10,000 - 4,000)] 4,800
61,300

Note: Pledge of goods amounts to acceptance of goods.

Q22> Raj Ltd. prepared their accounts financial year ended on 31st March 2019. Due to unavoidable

Circumstances actual stock has been taken on 10th April 2019, when it was ascertained at Rs 1,25,000.

It has been found that;

(i) Sales are entered in the Sales Book on the day of dispatch and return inwards in the Returns

Inward Book on the day of the goods received back.

(ii) Purchases are entered in the Purchase Book on the day the Invoices are received.

(iii) Sales between 1st April 2019 to 9th April 2019 amounting to Rs 20,000 as per Sales Day Book.

(iv) Free samples for business promotion issued during 1st April 2019 to 9th April 2019 amounting to Rs

4,000 at cost.

(v) Purchases during 1st April 2019 to 9th April 2019 amounting to Rs 10,000 but goods amounts to Rs

2,000 not received till the date of stock taking.

(vi) Invoices for goods purchased amounting to Rs 20,000 were entered on 28th March 2019 but the

goods were not included in stock.

Rate of Gross Profit is 25% on cost.

Ascertain the value of Stock as on 31st March 2019. (May 2019)

SOL:

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Statement of Valuation of Physical Stock as on 31st March,2019

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