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    Returns accounts are involved in the calculation of gross profit, which becomes: Less Less Equals Equals Sales less Returns Inwards Sales less Returns Inwards cost of goods Sold less Returns Outwards gross profit gross profit 10 - 2 returns inand Returns Outwards Net Sales Net Sales Net Purchases less return outwards less Returns Inwards Net Purchases Net Purchases Net purchase net.

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    Chapter 10 Book-keeping

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    Returns accounts are involved in the calculation of gross profit, which becomes: Less Less Equals Equals Sales less Returns Inwards Sales less Returns Inwards cost of goods Sold less Returns Outwards gross profit gross profit 10 - 2 returns inand Returns Outwards Net Sales Net Sales Net Purchases less return outwards less Returns Inwards Net Purchases Net Purchases Net purchase net.

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    218 views11 pages

    Chapter 10 Book-Keeping

    Uploaded by

    fileacademy
    Returns accounts are involved in the calculation of gross profit, which becomes: Less Less Equals Equals Sales less Returns Inwards Sales less Returns Inwards cost of goods Sold less Returns Outwards gross profit gross profit 10 - 2 returns inand Returns Outwards Net Sales Net Sales Net Purchases less return outwards less Returns Inwards Net Purchases Net Purchases Net purchase net.

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    of 11

    Book-keeping

    Financial statements
    Further considerations

    Chapter 10

    Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma 2007 10 - 1


    Returns inwards and
    returns outwards

    Both the returns accounts are involved in


    the calculation of gross profit, which
    becomes:

    Sales
    Sales less
    less Returns
    Returns Inwards
    Inwards
    Less
    Less 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 10 - 2


    Returns inwards and returns
    outwards

    Sales
    Sales ₤10,000
    ₤10,000
    less
    less Returns
    Returns Inwards
    Inwards 350
    350
    Net
    Net Sales
    Sales ₤₤ 9,650
    9,650

    Purchases
    Purchases ₤₤ 7,350
    7,350
    less
    less Returns
    Returns Outwards
    Outwards 200
    200
    Net
    Net Purchases
    Purchases ₤₤ 7,150
    7,150

    Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma 10 - 3


    Returns in- and outwards
    & Gross Profit

    Sales
    Sales ₤10,000
    ₤10,000
    less
    less Returns
    Returns Inwards
    Inwards 350
    350
    Net
    Net Sales
    Sales ₤₤ 9,650
    9,650
    Less
    Less Cost
    Cost of
    of Goods
    Goods Sold:
    Sold:
    Purchases
    Purchases ₤7,350
    ₤7,350
    less
    less Returns
    Returns Outwards
    Outwards 200
    200 7,150
    7,150
    Gross
    Gross profit
    profit or
    or result
    result on
    on trade
    trade ₤₤ 2,500
    2,500

    Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma 10 - 4


    Trial Balance K Wade as
    at 31 Dec. 2006

    Dr
    Dr Cr
    Cr
    ₤₤ ₤₤
    Sales
    Sales 10,000
    10,000
    Purchases
    Purchases ₤7,350
    ₤7,350
    Returns
    Returns inwards
    inwards 350
    350
    Returns
    Returns outwards
    outwards 200
    200

    Returns
    Returnsare
    arealways
    alwaysdeducted
    deductedfrom
    fromthethefigure
    figureonon
    the
    the opposite side 
    opposite side forming
    formingaa ‘cross’
    ‘cross’on
    onthe
    thetrial
    trialbalance
    balance
    Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma 10 - 5
    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 10 - 6


    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 10 - 7


    Adjustments needed
    for stock

    Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma 10 - 8


    Calculations of stock

    Stock
    Stockin
    inhand
    hand++ purchased
    purchasedstock
    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
    canrewrite
    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 10 - 9


    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 10 - 10
    End of Chapter 10:
    Financial statements
    Further considerations

    Wood/Robinson: Book-keeping and Accounts, 6e, © T. Sijtsma 2007 10 - 11

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