Chapter 10 Book-keeping

Book-keeping Financial statements Further considerations

Chapter 10

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma 2007

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Returns inwards and returns outwards Both the returns accounts are involved in the calculation of gross profit, which becomes: Less Less

Sales Sales less less Returns Returns Inwards Inwards Cost Cost of of Goods Goods Sold Sold less less Returns Returns Outwards Outwards

Equals Equals

Gross Gross profit profit

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma

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Returns inwards and returns outwards Sales Sales less less Returns Returns Inwards Inwards Net Net Sales Sales

₤10,000 ₤10,000 350 350 ₤₤ 9,650 9,650

Purchases Purchases less less Returns Returns Outwards Outwards Net Net Purchases Purchases

₤₤ 7,350 7,350 200 200 ₤₤ 7,150 7,150

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma

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Returns in- and outwards & Gross Profit Sales Sales less less Returns Returns Inwards Inwards Net Net Sales Sales Less Less Cost Cost of of Goods Goods Sold: Sold: Purchases Purchases less less Returns Returns Outwards Outwards Gross Gross profit profit or or result result on on trade trade

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma

₤10,000 ₤10,000 350 350 ₤₤ 9,650 9,650 ₤7,350 ₤7,350 200 200 7,150 7,150 ₤₤ 2,500 2,500 10 - 4

Trial Balance K Wade as at 31 Dec. 2006 Dr Dr ₤₤ Sales Sales Purchases Purchases Returns Returns inwards inwards Returns Returns outwards outwards

Cr Cr ₤₤ 10,000 10,000

₤7,350 ₤7,350 350 350 200 200

Returns Returnsare arealways alwaysdeducted deducted from fromthe thefigure figureon on the the opposite opposite side side→ →forming forming aa‘cross’ ‘cross’on onthe thetrial trialbalance balance

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma

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Carriage inwards Carriage Carriage inwards: inwards: •• Goods Goods purchased purchased from from supplier(s) supplier(s) •• Some Some suppliers suppliers charge charge carriage carriage separately separately from from goods, goods, some some charge charge one one amount. amount. •• Trading Trading account: account: always always carriage carriage included included

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma

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Carriage outwards

Carriage Carriage outwards: outwards: •• cost cost of of delivering delivering goods goods to to the the firm’s firm’s customers. customers. •• P/L: P/L: expense expense

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma

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Adjustments needed for stock

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma

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Calculations of stock Stock Stockin inhand hand++ purchased purchased stock stock–– sold soldstock stock==remaining remaining stock stock According According to toprevious previous slide: slide: ₤3,000 ₤3,000++ ₤42,600 ₤42,600 ––₤40,100 ₤40,100== ₤5,500 ₤5,500 You Youcan can rewrite rewriteititin: in:

Stock Stockin inhand hand ++purchased purchasedstock stock––remaining remainingstock stock==sold soldstock stock or orin inany anyother otherform formyou youwant wantfor foran ananswer answer

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma

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Financial statements Trading Trading account*: account*: [Sales [Sales less less costs costs of of goods goods sold sold == Gross Gross Profit] Profit] Profit Profit and and loss loss account*: account*: [expenses [expenses and and revenues] revenues] Balance Balance sheet: sheet: [assets, [assets, liabilities liabilities and and capital] capital] * = Account is misleading because none of the above financial statements are ‘accounts’ according to the book-keeping definition of an account.

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma

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End of Chapter 10: Financial statements Further considerations

Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma 2007

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