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Hello,
Firstly, Thank you for the excellent video lectures for CIMA F1 which provides an in-depth and comprehensive insight to quickly assimilate the various component learning outcomes of the CIMA F1 syllabus. It’s been immensely beneficial for my CIMA studies.
My query is based on Kaplan Exam Practice kit for F1: Financial Reporting and Taxation.
Q332. The following items were extracted from an entity’s budget for next month:
$
Purchases on credit 360,000
Expected decrease in inventory during the month 12,000
Expected increase in trade payables during the month 15,000
Calculate the budgeted payment to trade creditors for the month.
Solution specified in the Exam Practice kit:
The answer is $345,000
$
Purchases on credit 360,000
Increase in trade payables (15,000)
Therefore payment to suppliers 345,000
Can I kindly request for a brief explanation pertaining to the above question as the solution suggests that an increase in trade payables have been deducted from Purchases on credit?
Look forward to your reply
Thank you
Hi,
Thanks for the kind comments, it is always great to hear.
The best way to think about the solution is to draw up a payable T-account and make up opening and closing balances that result in an increase of 15,000. So lets say the b/f is nil and the c/f is 15,000.
If you then put in the entry for the credit purchases of 360,000 and balance off the T-account then you should find the cash entry is 345,000. Try it and see how you get on.
Hope that clears it up for you, let me know if it doesn’t.
Thanks
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