Assertion (A): If Gross Profit Ratio is 20%, goods costing ₹ 3,00,000 sold for ₹ 4,00,000 will increase the ratio. Reason (R): Gross Profit = ₹ 4,00,000 − ₹ 3,00,000 = ₹ 1,00,000 G.P. Ratio = (1,00,000)/(4,00,000) xx 100 = 25% Since existing G.P. Ratio is 20%, it will increase. In the context of the above two statements, which of the following is correct?

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KollegeApply · Accepted Answer

(A) and (R) both are correct and (R) correctly explains (A). Explanation: Goods costing ₹3,00,000 are sold for ₹ 4,00,000, so gross profit is ₹ 1,00,000. The gross profit ratio on this sale is (1,00,000)/(4,00,000) xx 100 = 25%. Since the current gross profit ratio is 20%, this transaction will increase the overall gross profit ratio. As a result, both assertion and reasoning are correct, and reasoning accurately explains the assertion.

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