Mark-up and Margin

You are correct in saying that in 'real life' cash sales do not appear in the control account. However as workings it doesn't matter what you do. If you prefer then prepare the control account ignoring cash sales (as you would do in practice) and then you should get credit sales to be 143,000. If you then add on the cash sales you get total sales of 160,000 (which I am assuming is what is in the answer you have - if not then I have made an arithmetic mistake :-) Once you know total sales, then you can work out the cost of the goods sold. Since the mark-up is 1/3 of cost, then the sales are 1 + 1/3 = 4/3 x cost. So the cost is 3/4 x 160,000 = 120,000. (If this bit is not clear, then our free lectures on mark-ups and margins will help you). The way I calculate the cost of the goods lost is as follows: Calculate the purchases. For this you need to prepare a payables account and you should get purchases to be 143,000 (but again, check my arithmetic!). Then calculate what the cost of goods sold would have been on the figures given - opening inventory plus purchases less closing inventory. This comes to 47,000 + 143,000 - 12000 = 178,000. Since the 'true' cost of the goods sold was 143,000, it means that the cost of the goods lost must be 178,000 - 143,000 = 35,000. I hope that helps. Do let me know if that is the answer in your book (because if not then I have made a silly arithmetic mistake (or your book has :-) ).

The answer in my book is something like this. sales $160 000 less cost of goods sold: Inventory at 30 June 2010 $47 000 Purchases (your arithmetic is fine) $143 000 Less stock at 5 Nov 2010 (70 000) The answer is 120,000 which we deduct from sales obviously and thus, the gross profit is $40,000. Cost of stock lost in fire : $ ( 70 000 - 12000) = $58 000 And Yes I have watched the lecture, still this question left my confused.Thank you very much for you help :)

I have one more question of Incomplete records viz. calculating the profit at the year end. while preparing the statement of affairs, should any new personal asset brought into the business during the year be added in assets and deducted from the capital at the year-end?

There is no such term as "statement of affairs" :) I assume that you mean the statement of financial position (i.e, the balance sheet) If so, then if a sole trader brings in a personal asset into the business, the it increases the assets and increases (not reduces) the capital.

please explain me whether this calculation is right or not? It's the same question I asked you first sales $160 000 less cost of goods sold: Inventory at 30 June 2010 $47 000 Purchases (your arithmetic is fine) $143 000 Less stock at 5 Nov 2010 (70 000) The answer is 120,000 which we deduct from sales obviously and thus, the gross profit is $40,000. Cost of stock lost in fire : $ ( 70 000 – 12000) = $58 000 And Yes I have watched the lecture, still this question left my confused.Thank you very much for you help ?

That is correct :-)

thank you!

You are welcome :-)