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Inventory lecture..
For example 3, how come we don’t use a separate cost of sales account and only use the Statement of Profit and Loss (SOPL) account?
the balance carried forward from a cost of sales account should equal open inv + purchases – closing inv right?
thank you.
By all means open a cost of sales account if you want – it won’t affect anything because the cost of sales in the SOPL will end up the same figure and so the profit will be the same.
Limited companies will just show the cost of sales figure on the SOPL (as is explained later in the lectures on limited companies) although it doesn’t need a cost of sales account to be able to calculate it. A sole trader is more likely to show the detail on the SOPL itself.
However, as I have explained to you before, you cannot be asked to write up t-accounts in the exam, and so it is irrelevant how you arrive at the figure.
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