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Hello Sir,
on the revision kit of Kaplan there is this question which does not make sense to me, please could you help me understand it:
Sasha has prepared a draft stattement of profit and loss for her business as follows:
Sales 256,800
Cost of sales:
Opening inventory: 13,400
Purchases 145,000
closing inventory (14,200)
(144,200)
Gross profit 112,600
Expenses (76,000)
Net Profit 36,600Sasha has not yet included the following items
carriage in of £2300
discount recieved of £3900
carriage out of £1950We need to adjust for these and find the new figure for gross and net profit. The answer as per the kit is gross profit at 110300 and net profit as 36250.
However my question is why they would reduce the gross profit with carriage inward as it is income it should increase it right? also they adjusted discount received after the gross profit not along with purchases I dont understand that either as discount received must be part of the the purchases so should be considered all together?
Please help me.
thank youCarriage inwards is not income, it is an expense. (It is the delivery expense that we pay for goods that we have purchased)
Discount received is income, but it is received for paying suppliers early – it does not affect the actual purchase cost, but is shown as income after gross profit.
Both of these are explained in my free lectures. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
I understand this well now. Thank you sir.
I love your lectures they make the concepts very easy to understand
Thank you very much
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