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Hello! I have a question to ask.
Bob owns and manages B Co although he does not keep detailed accounting records. All of Bob’s sales are for cash. He pays certain expenses from his till and then banks the remaining funds. Bob maintains a $1,000 float and operates with a margin of 20%. He has provided you with the following information.
$
Purchases of goods (on credit) 20,000
Wages for clerical assistant (per week; there are 52 weeks in the year) 100
Stationery 500
Electricity 1,200
Bankings 12,800
Opening inventories 2,000
Closing inventories 3,000
Bob is unsure of the level of drawings taken during the year but estimates they were between $60 and $90 per week.
Required What were Bob’s drawings during the year? $I made a T account for the cash float but do not understand as to why we do not deduct COS from it as they are also expenses like wage expenses and stationery expenses? Also, I don’t understand what ‘bankings’ mean? And is there a way to approach this question without having to make a T account?
There isn’t really an alternative to preparing a t-account to answer this question.
Bankings is the term for paying cash into the bank (so Credit cash in hand, and Debit cash at bank).
As far as the cost of sales is concerned. the purchases are all on credit and will therefore be paid from the bank and not from cash.
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