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Hallo,
I have the following example and solution from F3 book. Could someone explain to me the solution:
Example:
A business had an opening inventory of $54,000 and a closing inventory of $60,000 in
its financial statements for the year ended 31 March 2010.Solution:
Dr Income statement 54,000 (op. bal)
Cr Inventory account 54,000 (op. bal)
Dr Inventory account 60,000 (cl. bal)
Cr Income statement 60,000 (cl. bal)I am reading the theory in the book as well and I see these contradictions to the respective T a/cs and can’t see the connection between the entries and the T a/c for op. an cl. balances of the Inventory a/c.
Do you have any explanation why do we Cr Inv. a/c with op. bal. and Dr. with closing bal,?
Thank you!
MP
Starting with closing inventory first.
Dr Inventory (Increase in Asset) SFP
Cr Closing Inventory (Decrease in Expense: decrease in cost of sales) SOCIAs to opening inventory, reverse the above. Because closing inventory in current accounting period is the opening inventory in the next accounting period.
Hallo,
I am still wondering why in the T a/c below as given in the F3 book, the entries are different:
Dr Inventory account Cr
———————————————————————————-
Current Year
Opening inv. b/f (A) || Income Statement (A)
Income Statement (B) || Closing inventory c/f (B)
———————————————————————————–
(A + B) || (A + B)
————————————————————————————
Next Year
Opening inv. b/f (B)This is not the same as in your entries, do you have any idea why?
Dr Inventory (Increase in Asset) SFP
Cr Closing Inventory (Decrease in Expense: decrease in cost of sales) SOCIThank you for helping!
MP
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