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Diesel fuel in inventory at Nov. 1, 2014 was $1250, and there were invoices awaited for $170.
During the year to Oct. 31, 2015, diesel fuel bills of $8,540 were paid, and a delivery worth $130 had yet to be invoiced.
At Oct. 31, 2015, the inventory of diesel fuel was valued at $980.
What is the value of diesel fuel to be charged to the income statement for the year ended Oct. 31, 2015?
Please don’t simply type out full questions and expect to be provided with a full answer. You must have an answer in the same book in which you found the question, so in future ask about whatever it is in the answer that you are not clear about and then I will explain.
First we calculate how much fuel was purchased by adjusting the cash paid by the opening and closing accruals. This gives total purchases of $8,500.
For the Statement of Profit or Loss (it is not called the Income Statement any more) we need to calculate the amount of fuel used. For that we take the purchases (of $8,500) and adjust for the opening and closing inventories (just as we do when calculated the cost of sales).
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