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as we prepare statement of profit or loss………we pass on the balance of incomes and expenses accounts to the statement of p/l to find out profit or loss incurred.
I want to know on transferring the balances to income statement, do we have to pass on any journal entries or not……….as we know after transfering the balances of these accounts to the income statement……..this accounts gets closed.
another question in finding gross profit we cancel the cost of sales from revenues.is cost of sales is a ledger account we treat it as or its just to show for calculation purpose.
as there is a question
Closing inventory of 250 bottles of vodka at a cost of $2,750 has not been recorded
so can we write the journal entry as rectifying
Dr Closing Inventory
Cr Cost of Salesor else,
Dr Closing Inventory
Cr Trading accountJournal entries are simply writing down an entry in words.
When you transfer an expanse account balance to the SOPL t-account, the entry is Dr SOPL Cr the expense account.
Some companies use a cost of sales account, and if they do then the entry is as per your first entry. In the exam there is no need to have a cost of sales account (just a purchases account) in which case the entry is as per your second entry.
I do suggest that you watch my free lectures – they are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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