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For sale or return, Instead of (400), why dont we make the profit to 1600 ? (-400 + 2000 (increased closing inventory increases profit) by looking at the overall impact ?
Thank you for the clarification. So adjustments to profit focus only on the effect on profit. I had the same understanding earlier but it’s much clearer now.
You are welcome 🙂
Hello Sir.
Your lectures have been very helpful thanks a lot. However, i thought prepayments shouldn’t be included in the current year’s financial statement? i don’t understand why the 490 was added to the profit. could you explain please.
They shouldn’t be included, so we need to remove them. Removing them reduces the expense which increases the profit.
Oh i see! it makes sense now. Thank you.
i still dont understand
You will have to say what you do not understand and then I will try and explain 🙂 (I assume that you have actually watched the lecture?)
Where can I find partnership accounts
Partnership accounts are not in the syllabus for Paper FA and have not been for many years !!!
Hello there. Where can i find lectures on incomplete records?
‘Incomplete records’ is not a separate topic.
It is being able to deal with basic double entry and/or control accounts and/or mark ups and margins.
All the topics are explained in my free lectures. The lectures are a complete free course and cover everything needed to be able to pass the exam well.
Hello sir,
Lower value of closing inventory will increase the profit ,then why did you deduct the amount while adjusting the profit
please explain.
A lower value of closing inventory does not increase the profit. It increases the cost of sales which decreases the profit.
Thank you so much sir
You are welcome 🙂
Hello Sir,
Requesting for some clarity in the video of adjustments to profit.
In my understanding, I thought that since sales have not been confirmed yet, then they should also be adjusted. Therefore sales 2000 plus profit 400 should both be deducted from the draft profit.
Please assist
If we were producing a full profit statement, then we would reduce the sales. But we would also increase the closing inventory because the goods still belong to the company (and this would have the effect of reducing the cost of sales). The net effect of the two would be that the profit would reduce by 400.