The following list of balances relate to m. Summer who has been trading for one year. List of balance at 31st December 2009. Sales $28794 Purchases $23803 Rent and rates $854 Lighting expenses $422 Salaries $3164 Insurance $105 Shop buildings $50000 Shop fixtures $1000 Debtors $3166 Trade expenses $506 Creditors $1206 Cash at bank $3847 Drawings $2800 Motor van $5500 Motor running expenses $1133 Capital $65900 Accruals $400
Stock at 31st December 2009 1. Prepare the trail balance for m.summer 2. Prepare the Financial Statements for m. Summer
It is not possible to calculate closing stock by purchase and sales amounts. Let me explain with stock items, for example (assume with physical stock) example 1: Opening balance : 10,000 (20 qty * each cost 500) purchase balance: 20,000 (40qty * Each cost 500) ------ Total stock : 30,000 (means, I have 60 Qty @ Cost 500) ------ sales Balance : 30,000 ( means I sold 50 qty @ cost 600) ------ Now I have stock balance 10 qty @ cost 500) (This is correct) ------ I think the following is equation is wrong.... Closing stock = opening stock + purchases - sales consider the above examples, the result is zero i.e, closing stock=10,000(Op Stock)+20,000(purch)-30,000(sales) =000000 IS IT Correct answer for closing stock (it's wrong). FINALLY YOU CAN'T CALCULATE CLOSING STOCK WITH AMOUNTS ONLY.
You need to know the sales at cost... All sales include a contribution to fixed costs then profit.. Remove this and then the above equation is correct.
