Simple doubt...

Option (a) is right. as Net Profit is Rs.135000 that is 20% of Rs.675000 i.e. Net Sales ( 695000-20000) so the gross sales will be Rs.695000/-

I hope u will understand now.

Thanks Mr. Anish for answering...

Could you please explain in detail as to how you got Rs.675000 as Net sales? A step by step answer will be greatly appreciated...

Thanks again,

Rat65

Here is simple explanation

Trading Account

Particulars                                          Amt.                                           Particulars                                                Amt.

Opening Stock                           30000.00                                         Gross Sales            -  695000.00

Purchases - 560000.00                                                                      (-) Return                 -     20000.00

(-) Return     -  15000.00                                                                       Net Sales                                               675000.00

Net Purchases -                        545000.00                                       Closing Stock                                           40000.00

Carriage Inward                            5000.00

Gross Profit                  -           Rs.135000/- (20% of Net Sales)

  Total                             -              715000.00                                                                                                          7 15000.00

So your question asks about the gross sales and not the net sales, what you are calculating is the net sales and not the gross sales. May be this will be helpful to you.

So the Gross Sales for June 04 will be Rs.695000/- which is option (A)

Thanks Mr.Vivek for the answer,

How did you get Net sales?

See for this question, you might be aware of one formula which is--

Cost of goods sold(net)= Opening stock + Net purchases + direct exp. - closing stock

Substitute all values in the above formula,

Cost of goods sold(net) = 30000 + 545000 + 5000 - 40000

                                      = INR 540000

Now question says profit is 20% of net sales which means profit is 1/5th of net sales. To be more clear  ,  1= profit and 5 = net sales in the above fraction...

So what is cost?

Cost = net sales - profit

         =  5    -  1

         = 4

Which we can say, that profit is 1/4th on cost of net sales...

So profit will be =   540000(cost of net sales) * 1/4th

                            = INR 135000

So now the Net sales will be = cost of net sales + profit

                                               = 540000  +135000

           Net sales                     = INR 675000                          

now gross sales will be =  Net sales + returns

                                       =  675000 + 20000

Gross sales                    =  INR 695000

Hope you have understood 

COGS = op stock + Net purchases + Carriage inwards - Closing stock

             = 30,000 + (5,60,000 - 15,000) + 5,000 - 40,000

             = 30,000 + 5,45,000 + 5,000 - 40,000

             = 5,40,000

NET SALES = COGS + GP

given GP is 20% of Net sales

therefore, COGS is 80% of Net Sales

Net sales = 5,40,000/80% = Rs. 6,75,000

Gross sales - Return inwards = Net sales

 therefore Gross sales = net sales + return inwards

                                          = Rs. 6,75,000 + Rs. 20,000 = Rs. 6,95,000

Regards, CA  Shakuntala Chhangani

Thank You both for answering.....Problem solved