Hi,
I have a question: Herbert is a carpenter, he takes a bird table from his stock. The cost of making the table is £80 and Herbert would normally achieve a mark-up of 20% on such goods.
Identify the adjustment Herbert needs to make in the accounts for tax purposes assuming he has reflected in the accounts the deduction for the cost of making the table.
Answer in the book is £96 must be added, however as it looks like he has already credited COS by £80 would the adjustment needed just be for the profit, so £16 added?
Many Thanks for you help :)
David
Ask the Tutor ACCA TX-UK
Adjustment to accounting profit - drawing from owner
He must account for the "sale" of the item - ie £96 - this - after taking account of the COS £80 reflects a "profit" of £16
If this comes up in an exam - answer the question the way you think and then add an explanation for the examiner/marker to let them know your thinking - always do this if in doubt.
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