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Page 2 If Cost of goods sold is Rs. 80,700, Opening stock Rs.5,800 Closing stock Rs.6,000 then amount of purchase will be- • (a) Rs.80,500 • (b) Rs.74,900 • (c) Rs.74,700 • (d) Rs.80,900 Answer. (d) Rs.80,900 Page 3 If Cost of goods sold is Rs. 80,700, Opening stock Rs.5,800 Closing stock Rs.6,000 then amount of purchase will be- • (a) Rs.80,500 • (b) Rs.74,900 • (c) Rs.74,700 • (d) Rs.80,900 Answer. (d) Rs.80,900 The total cost of goods available for sale with a company during the current year is Rs.12,00,000 and the total sales during the period are Rs.13,00,000. If the gross profit margin of the company is 33 1/3% on cost, the closing inventory during the current year is • (a) Rs.4,00,000 • (b) Rs. 3,00,000 • (c) Rs.2,25,000 • (d) Rs. 2,60,000. Answer. (c) Rs. 2,25,000 Page 4 If Cost of goods sold is Rs. 80,700, Opening stock Rs.5,800 Closing stock Rs.6,000 then amount of purchase will be- • (a) Rs.80,500 • (b) Rs.74,900 • (c) Rs.74,700 • (d) Rs.80,900 Answer. (d) Rs.80,900 The total cost of goods available for sale with a company during the current year is Rs.12,00,000 and the total sales during the period are Rs.13,00,000. If the gross profit margin of the company is 33 1/3% on cost, the closing inventory during the current year is • (a) Rs.4,00,000 • (b) Rs. 3,00,000 • (c) Rs.2,25,000 • (d) Rs. 2,60,000. Answer. (c) Rs. 2,25,000 while finalizing the current year’s profit, the company realized that there was an error in the valuation of closing stock of the previous year. In the previous year, closing stock was valued more by Rs.50,000. As a result (a) Previous year’s profit is overstated and current year’s profit is also overstated (b) Previous year’s profit is understated and current year’s profit is overstated (c) Previous year’s profit is understated and current year’s profit is also understated (d) Previous year’s profit is overstated and current year’s profit is understated Ans. (d) Previous year’s profit is overstated and current year’s profit is understated Page 5 If Cost of goods sold is Rs. 80,700, Opening stock Rs.5,800 Closing stock Rs.6,000 then amount of purchase will be- • (a) Rs.80,500 • (b) Rs.74,900 • (c) Rs.74,700 • (d) Rs.80,900 Answer. (d) Rs.80,900 The total cost of goods available for sale with a company during the current year is Rs.12,00,000 and the total sales during the period are Rs.13,00,000. If the gross profit margin of the company is 33 1/3% on cost, the closing inventory during the current year is • (a) Rs.4,00,000 • (b) Rs. 3,00,000 • (c) Rs.2,25,000 • (d) Rs. 2,60,000. Answer. (c) Rs. 2,25,000 while finalizing the current year’s profit, the company realized that there was an error in the valuation of closing stock of the previous year. In the previous year, closing stock was valued more by Rs.50,000. As a result (a) Previous year’s profit is overstated and current year’s profit is also overstated (b) Previous year’s profit is understated and current year’s profit is overstated (c) Previous year’s profit is understated and current year’s profit is also understated (d) Previous year’s profit is overstated and current year’s profit is understated Ans. (d) Previous year’s profit is overstated and current year’s profit is understated An overstatement in the value of closing stock overstates all of the following except a) Net income b) Current assets c) Capital of the business d) Cost of goods sold Ans. d) Cost of goods soldRead More
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FAQs on MCQ - Inventories - Accounting for CA Foundation
| 1. What is the definition of inventories in the context of accounting? |  |
| 2. How are inventories valued in accounting? | |
Ans. Inventories are typically valued at the lower of cost or net realizable value. Cost can be determined using various methods such as the first-in, first-out (FIFO) method, last-in, first-out (LIFO) method, or weighted average cost method. Net realizable value is the estimated selling price minus any costs of completion, disposal, and transportation.
| 3. How does the valuation of inventories affect a company's financial statements? | |
Ans. The valuation of inventories can have a significant impact on a company's financial statements. It directly affects the cost of goods sold and, consequently, the gross profit. It also impacts the value of the inventory asset on the balance sheet, which can affect the company's overall financial position.
| 4. What are the main challenges in managing inventories effectively? | |
Ans. Managing inventories effectively can be challenging due to factors such as demand fluctuations, supply chain disruptions, perishability or obsolescence of goods, and the need for accurate forecasting. Companies need to strike a balance between carrying enough inventory to meet customer demand while minimizing carrying costs and the risk of holding excess or obsolete inventory.
| 5. How can companies improve inventory management? | |
Ans. Companies can improve inventory management by implementing various strategies and techniques such as adopting advanced inventory management systems, conducting regular inventory audits, optimizing supply chain processes, implementing just-in-time (JIT) inventory systems, and closely monitoring demand and market trends. These measures can help reduce costs, improve efficiency, and minimize the risk of inventory obsolescence or stockouts.
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