1. Profile photo of vinai says

    the lecturer is wrong, if the goods are in purchases and payables but not in inventory, the accounts are not wrong…one aspect of inventory are called goods in transit.

    • Profile photo of gromit says

      @vinai, No, you are wrong. If a purchase of goods appears in payables and purchases then there has been a Dr to Purchases and a Cr to Payables. The purchases figure then goes into cost of sales. If the goods are not included in closing inventory, then cost of sales will be overstated. It doesn’t matter whether those goods have simply not been counted or are in transit. If you account for the purchase you have to account for the goods in closing inventory (unless they have already been sold). CoS = the cost of what you have sold.

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