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I am watching the lecture on this website (Double entry bookkeeping part b) and i have 2 difficulties. When the lecturer is closing the T accounts to produce the income statement, (exactly on 3:18 minutes of the video) he is closing the Purchases account and he said that all the goods that were bought, were sold by the business thus he credited the account with 1100 against the debit of 1100 to bring the balance 0. My question is ; How he knew that all goods were sold ? as it is listed nowhere. My other question is ; how can i identify the T accounts if i have to list them in the Income statement or in the Balance sheet?
Thanks in advance
Item (g) in the question says ‘they sell all the remaining goods…..’
(I assume that you have downloaded the course notes that go with these lectures 🙂 )The Statement of Financial Position is showing the assets and liabilities of the business, and the amount owing to the owner.
So these accounts are listed here.
The Income Statement is showing the income earned during the period and the expenses incurred during the period. So the income and expense accounts are listed here.1 MAY Purchase of goods resale on credit 300
2 may max injects long term capital into business 1400
3 May payment of rent made 750
5 May max withdraws cash from business Sales made on credit.400
7 May Sales made on credit 1200
(goods originally cost 600)At the start of the week assets=15700 liabillities 11200
at the end capital=?In the answer of this test 600 deducted from assets and capital .. I didn’t understand why?
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