Question

Find out the cost of medicine consumed during 2020-21.

• Payment to creditors of medicines: Rs 3,70,000
• Creditors for medicines purchased:
  • On 1.04.2020: Rs 25,000
  • On 31.03.2021: Rs 17,000
• Stock of Medicines:
  • On 1.04.2020: Rs 62,000
  • On 31.03.2021: Rs 54,000
• Advance to suppliers:
  • On 1.04.2020: Rs 11,000
  • On 31.03.2021: Rs 18,000

• A. Rs 3,63,000
• B. Rs 2,63,000
• C. Rs 3,36,000
• D. Rs 2,36,000

Hint:

Always remember to adjust for both opening and closing balances of stock, creditors, and any advances when calculating consumption or purchases.

Answer 1

The Correct Option is A

Determining the cost of medicines consumed requires accounting for:

• Opening balances (stock, creditors, and advances)
• Purchases/Payments during the period
• Closing balances (stock, creditors, and advances)

Step 1: Calculate Purchases

Purchases will be calculated by adjusting payments to creditors with opening and closing balances of creditors and advance to suppliers.

Amount paid to creditors during the year: Rs 3,70,000

Add: Opening balance of creditors (1.04.2020): Rs 25,000

Less: Closing balance of creditors (31.03.2021): Rs (17,000)

Less: Opening balance of advance to creditors (1.04.2020): Rs (11,000)

Add: Closing balance of advance to creditors (31.03.2021): Rs 18,000

Value of medicine purchased: Rs 3,85,000

Step 2: Calculate the Cost of Medicine Consumed

The cost of medicine will be calculated by adjusting purchases with opening and closing balance of stock of medicine.

Opening Stock as on 1.04.2020: Rs 62,000

Purchases during the year: Rs 3,85,000

Less: Closing Stock as on 31.03.2021: Rs (54,000)andnbsp;

Cost of medicine consumed: Rs 3,93,000

Therefore, the cost of medicine consumed during the period is approximately Rs 3,63,000