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I have watched your lectures and I understood them but I seem to be having some difficulty with this question. I’ll be thankful if you’d explain it in detail.
Q: Stationary paid for during the year amounted to $1,350. At the beginning of the year there was an inventory of stationary on hand of $165 and an outstanding stationary invoice for $80. At the end of the year there was an inventory of stationary on hand of $140 and an outstanding invoice for $70.
The stationary figure to be shown in the Statement of profit or loss for the year is:
A. $1,195
B. $1,335
C. $1,365
D. $1,505P.S: What exactly is an outstanding invoice?
The amount paid for stationery is 1350.
Because you owe 70 at the end of the year, and owed 80 at the start of the year, the actual purchases of inventory were 1350 + 70 – 80 = 1340
However, because of the opening and closing inventories, the actual usage (and therefore the expense for the year) is 1340 +165 – 140 = 1365
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