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Accruals and prepayments

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  • This topic has 2 replies, 2 voices, and was last updated 3 months ago by Val2020.
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  • July 2, 2020 at 9:28 pm #575774
    Val2020

    Stationary paid for during 20×5 amounted to $1350. At the beginning of 20×5 there were inventories of stationery on hand of $165 and an outstanding stationary invoice for $80. At the end of 20×5, there were inventories of stationery on hand of $140 and an outstanding stationery invoice for $70.

    Task: The stationery figure to be shown in the statement of profit or loss for 20×5 is:

    $1365

    How do you calculate this and account for?

    Thanks
    Val

    July 3, 2020 at 10:36 pm #575870
    Ken Garrett
    Keymaster

    If payments in the year were 1350 and 80 was owing at the start, then 1350-80 = 1270 relate to this year’s purchases. 70 was owed at the end of the year so 1270 + 70 = 1340 are this year’ purchases.

    Cost of sales = opening inventory + purchases – closing inventory = 165 + 1340 – 140 = 1365.

    July 6, 2020 at 9:28 pm #576170
    Val2020

    Thank you!

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