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I have some questions:
1. Does income statement consists of return inwards?
2. Is COGS affected by return inwards?
Pleas answer, thanks very much.Returns inwards are returns from customers and will appear on the Statement of Profit or Loss (it is not called the Income Statement any more) as a reduction in the sales.
It does not affect the cost of goods sold because it is nothing to do with the cost of the goods.
This is all explained in my free lectures. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
Thanks so much, but may i have another help with this question:
The following information has been extracted from the books of Tonson, a limited liability company, as at 31 October 20X6.
Dr Cr
$’000 $’000
Cash 15
Insurance 75
Inventory at 1 November 20X5 350
General expenses 60
Energy expenses 66
Marketing expenses 50
Wages and salaries 675
Discounts received 50
Share premium account 200
Retained earnings at 1 November 20X5 315
Allowance for receivables at 1 November 20X5 40
Sales revenue 5,780
Telephone expenses 80
Property expenses 100
Bank 94
Returns inward 95
Trade payables 290
Loan note interest 33
Trade receivables 900
Purchases 3,570
7% loan notes 470
Irrecoverable debts 150
$1 ordinary shares 1,800
Accumulated depreciation at 1 November 20X5
Buildings 360
Motor Vehicles 80
Furniture and equipment 420
Land at cost 740
Buildings at cost 1,500
Motor vehicles at cost 240
Furniture and equipment at cost 1,200
9,899 9,899
You have also been provided with the following information:
(a) Inventory at 31 October 20X6 was valued at $275,000 based on its original cost. However, $45,000 of this inventory has been in the warehouse for over two years and the directors have agreed to sell it in November 20X6 for a cash price of $20,000.
(b) The marketing expenses include $5,000 which relates to November 20X6.
(c) The allowance for receivables is to be increased to the equivalent of 5% of trade receivables.
(d) There are wages and salaries outstanding of $40,000 for the year ended 31 October 20X6.
(e) Buildings are depreciated at 5% of cost. At 31 October 20X6 the buildings were professionally valued at $1,800,000 and the directors wish this valuation to be incorporated into the financial statements.
(f) Depreciation is to be charged as follows:
(i) Motor vehicles at 20% of carrying amount
(ii) Furniture and equipment at 20% of cost
(g) No dividends have been paid or declared.
(h) Tax of $150,000 is to be provided for the year.
(i) During October 20X6 a bonus issue of one for ten shares was made to ordinary shareholders. This has not been entered into the books. The share premium account was used for this purpose.
What is the statement of profit or loss, and the statement of financial position for the year ended 31 October 20X6.I have done the first one, but I cant come up with the SOFP, the figures aren’t equal. Please help. Thanks very much. Here is my P&L:
STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 OCTOBER 20X6
$’000 $’000
Sales revenue 5,780
Less returns inward (95)
5,685
Cost of sales (W1) (3,670)
2,015
Discounts received 50
Gross profit 2,065
Expenses
Insurance 75
General expenses 60
Energy expenses 66
Marketing expenses (50 – 5) 45
Wages and salaries (675 + 40) 715
Telephone expenses 80
Property expenses 100
Debenture interest 33
Irrecoverable debt expense (W2) 155
Depreciation (W3) 347
(1,676)
Net profit before taxation 389
Taxation (150)
Profit for the year 239
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