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Is why is it that if you have a higher closing stock you will have a higher profit and if you have a lower closing stock you have a lower profit… I did try example three again and saw it for myself but can you explain why this is so?
The cost of what you sell is equal to the cost of what you buy, less what you have left not sold (the closing inventory).
So if there is more closing inventory then it means the cost of what was sold is lower, and therefore the profit is higher.
(Do note that we stopped calling it ‘stock’ many years ago, and now call it ‘inventory’)
(Are you watching my free lectures, because they will help you. They are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.)
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