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Dear Sir
I am concerned I am going to fail my exam by ACCA interpretations of time schedules
I have been in business may years and my understanding of the term “one months’s credit” is that the goods I use in January are paid for at the end of February. In other words i will receive a statement for january purchases around the 10th of february and pay in february accounts.
December 2014, section B Question 1 defies all logicI need to know what ACCA means, because my interpretation is clearly wrong. They say raw materials are on one month’s credit and then proceed to put January raw materials in January cash payments
thank you
No – it is perfectly logical but you have not read the question properly.
One months credit does indeed mean that goods purchased in January are paid for in February, and this is what the examiners answer has done.
However, if you read note 2 of the question it says that production takes place one month before sales.
So for sales in January, production is in December and therefore the materials are purchased in December. They take one months credit and so the purchases in December are paid for in January.
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