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We need to write up a total payables account because we have all the information needed apart from the figure for purchases. We know the opening and closing balances for payables, we know the amount of cash paid, and we know the contra entry, and so the missing figure to make the account balance is the figure for purchases.
This is very similar to an example that I work through in my free lectures on control accounts. Have you watched the lecture?
You have a t-account in the answer to the question in the Revision Kit, so if you are unsure about any specific figure in the account then say which one.
Yes sir, I have watched all the lectures.
I am unsure about the cost of sales figure. How did the 2/3 come?
I don’t understand you because there is no 2/3 in either the question or the answer for 20.5 in the current edition of the Revision Kit.
If you are using an older edition then type out the first line of the question and I will see if the same question is in the current edition with a different question number.
A sole trader fixes her prices by adding 50 per cent to the cost of all goods purchased.
This is the first line sir.
The question is in the current edition but has a different question number 🙂
For every $100 cost, they will add $50 and so the selling price is $150.
Therefore for every $150 selling price, the cost is $100. So the cost is 100/150 times the revenue.
100/150 is the same as 2/3.
I do several examples on this in my free lectures on mark-ups and margins. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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