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April 20, 2020 at 10:26 pm
In Q2, you balanced 4000 debit with 4000 P&L credit. That’s alright BUT, why didn’t you balance the account After 6000 debited????
March 8, 2017 at 2:59 am
Why do we have to make a balance on the statement of profit and loss T account? Why not just detail as ‘Gross Profit’?
December 7, 2016 at 11:17 am
Each lecture I have watched so far, is well explained and easy to understand. Thank you so much for this opportunity!
John Moffat says
December 7, 2016 at 1:38 pm
Thank you very much for your comment 🙂
October 20, 2016 at 11:50 pm
Dear Mr Moffat
1. When we remove the opening inventory and transfer it to the debit side of income statement, do we do it in order to show that costs incurred in production unsold must decrease sales revenue ( credit side of income statement ) ? 2. Since closing inventory is transferred to the credit side of income statement, do we do it in order to decrease expenses incurred in full production with the aim to arrive at expenses incurred in production sold on debit side of income statement ?
October 21, 2016 at 7:54 am
We are trying to show the cost of the goods that were sold.
The goods sold are the opening inventory plus the purchases, less the closing inventory (because they were not sold in the period).
October 21, 2016 at 6:25 pm
October 22, 2016 at 9:54 am
You are welcome 🙂
January 21, 2016 at 5:03 pm
Hi, In Example 2, in the Inventory A/C why do we put 4000 in the debit side?
April 13, 2016 at 4:42 pm
Because inventory is an asset and when assets increase they are debited.
October 8, 2015 at 4:14 pm
Mr.john moffat your the best.. I need some lecture on cash flow statement,consolidation ,inventory how to do NRV .
October 8, 2015 at 4:22 pm
Thank you. There are lectures on everything in the syllabus for Paper F3.
August 22, 2015 at 11:36 am
Hi Mr Moffat,
I am unsure with questions regarding sole trader taking drawings whether to Cr Inventory or to Cr Purchases.
It is not always clear, can you please explain the difference?
August 22, 2015 at 12:19 pm
The inventory is counted at the end of the period. The owner is not going to wait until it is counted, and then take some for himself 🙂
We always Cr purchases and Dr drawings.
August 23, 2015 at 11:16 am
Many thanks Mr Moffat.
April 1, 2016 at 5:50 pm
Dear Mr Moffat, I’m sorry if this can be a silly question. However, I wonder if the owner takes money (cash) from the business, should we Cr Cash a/c and Dr Drawings a/c?
April 1, 2016 at 6:17 pm
If they take cash, then yes – this is the entry (and is explained in the lecture on double entry bookkeeping).
May 31, 2015 at 5:42 am
Hi, In topic inventory IAS 16 the lecturer has credited the inventory in income statement example 2. Inventory is an asset therefore it should be debited in income statement why it has been credited? Because on income statement debit side are for expenses and credit side is for income. Please explain.
May 31, 2015 at 12:05 pm
The inventory account records the asset, and this has been debited.
The income statement has been credited because closing inventory reduces the cost of goods sold. Assets do not appear in the income statement!
I suggest that you watch the lecture again.
March 19, 2015 at 12:10 pm
Hi! Is there no need to create a cost of sales account first and close the same later to profit and loss account? Because sometimes if we close all the purchases to the income statement account, I loose track of the ending inventory if it is not given.
March 19, 2015 at 1:17 pm
There is no need, although in practice you can deal with it in many ways – there are no rules for the actual double entries.
The way in the lecture is the way for the exam (although there is very little testing of debits and credits in the exam).
March 6, 2015 at 7:37 am
In Q2: Could you please explain why you don’t balance the inventory account just because it appears in the balance sheet??
March 6, 2015 at 8:56 am
But I do balance it – a balance of 4,000 is left on the inventory account. (As I explain in earlier chapters, if there is only one figure on the account you do not need to start putting in totals and carrying forward a balance when you will still end up with just one figure.)
May 8, 2014 at 1:41 pm
An invoice of $15,000 for energy costs relating to the quarter ended 30 November 20X7 was received on 2 December 20X7. Energy costs are included in administrative expenses. the year ends 31october 2007. Administrative expenses —325. the answer is: 15000 2/4=10000. i understood this but i didn’t understand this: ,,Administrative expenses (325 + 10) .why we add 10? I think because 15000 included we less 325 by 15 and than add 10.. pls.help me.. last year i get 48 marks and…:(
May 8, 2014 at 1:42 pm
sorry 15000 *2/3=10000
May 8, 2014 at 2:54 pm
I have no idea what the 325 and the 10 are!
With regard to the invoice of 15,000, that was for the three months September, October, November. The year end is 31 October, and so at the year end they were owing for 2 months. If the invoice for 3 months was 15,000, then they must have been owing 2/3×15,000 = 10,000 for the two months. The invoice had not been recorded as the year end, and so there is an accrual of 10,000 and the expense in the Statement of profit or loss needs increasing by 10,000.
May 8, 2014 at 1:29 pm
hi john, l saw this example and answer is this : Cost of sales Opening inventory 160 Purchases 1,140 Closing inventory (75) =1,225 add Depreciation (W2) 59= 1,284 in the example it said that Depreciation is treated as a cost of sales expense. why it addes and not less?
May 8, 2014 at 2:50 pm
If depreciation is a cost of sales expense, then it makes the total cost of sales bigger!
May 11, 2014 at 4:58 pm
September 11, 2016 at 9:22 am
I’d like to know clearly, do we include depreciation expense in Cost of Sales or not? Thank you very much!
September 11, 2016 at 11:30 am
If they make their own goods, then depreciation of the machines and the factory are part of cost of sales – depreciation of other assets is not. If they do not make their own goods then depreciation is not part of cost of sales.
November 23, 2013 at 12:51 pm
A company with an accounting date of 31 October carried out a physical check of inventory on 4 November 20X3, leading to an inventory value at cost at this date of $483,700. Between 1 November 20X3 and 4 November 20X3 the following transactions took place: 1 Goods costing $38,400 were received from suppliers. 2 Goods that had cost $14,800 were sold for $20,000. 3 A customer returned, in good condition, some goods which had been sold to him in October for $600 and which had cost $400. 4 The company returned goods that had cost $1,800 in October to the supplier, and received a credit note for them. What figure should appear in the company’s financial statements at 31 October 20X3 for closing inventory, based on this information? A $458,700 B $505,900 C $508,700 D $461,500
I don’t understand how the answer is D. i thought we must add purchases a less sales. .not add sales and less purchases
November 23, 2013 at 12:59 pm
The reason is that we need to work backwards because we know the inventory on 4 Nov and we want to know what it was on 31 Oct. So…..if you purchased something on 2 Nov (for example) the inventory on 4 nov will be higher and the inv on 31 oct would be lower.
September 7, 2014 at 8:41 am
The answer is 505 900. No doubt. The physical check is finished on 4-th of November but the figure 483 700 is the closing inventory for the period.
September 7, 2014 at 8:53 am
The answer is certainly not 505,900!
The answer is 461500.
The inventory as at 4 November is 483700, so we have to work backwards to find out what it was on 31 October. 483700 – 38400 + 14800 – 400 + 1800 = 461500
September 16, 2013 at 2:24 pm
thank you so much open tuition.its really helpful.
September 12, 2013 at 9:24 am
You are simply the best !!.Thanks Mr Moffat
September 3, 2013 at 7:32 pm
which book are you using on your lectures
September 3, 2013 at 7:47 pm
September 3, 2013 at 8:27 pm
Our course notes. You can download them free of charge using the link just above the lecture.
September 4, 2013 at 1:46 pm
thank youu great lectures keep up the good work Sir!! God bless you.
August 23, 2013 at 7:41 pm
thx….so if i wanted to practice more specifically on inventory valuation wea wud i get more questions from??
August 2, 2013 at 10:16 pm
Dear admin you need correction on your lecture’s main heading It should be Inventory and IAS2
August 3, 2013 at 10:05 am
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