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Sir,
I need to make an income statement, the things to include in are:
1. Opening inventory(at sale price) 37,500
2. Purchases (at cost) 52,500
3.Sales (at sale Price) 75,000
4. Ending inventory (at sales price) 50,000
Can you please guide me to the working of Cost of goods sold.
Do we include Purchases, what is the treatment of it??Thanks in advance
You will not be asked to prepare Statement of Profit and Loss (it is no longer called the Income Statement) in Paper MA. It is Paper FA.
The cost of goods sold is equal to the opening inventory plus the purchases less the closing inventory. However the opening and closing inventories both need to be valued at cost (and there is not enough information in what you have typed to be able to calculate what the cost of the inventories is).
This is all explained in my free lectures for Paper FA. The lectures are a complete free course and cover everything needed to be able to pass the exam well.
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