PRC-1 · Chapter 10 · Question 74 of 100
A business has opening inventory of Rs. 40,000 and closing inventory of Rs. 50,000. What is the effect of this inventory movement on the Cost of Sales?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It decreases Cost of Sales by Rs. 10,000.
Explanation
Cost of Sales = Opening Inventory + Purchases - Closing Inventory. Since Closing Inventory is Rs. 10,000 higher than Opening Inventory, it effectively decreases the Cost of Sales by Rs. 10,000.
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