I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

 

245 

QUESTION 

Discounts

 

You are required to prepare the statement of profit or loss of Seesaw Timber Merchants for the year 

ended 31 March 20X6, given the following information. 

 

$      

Purchases at gross cost 

120,000 

Trade discounts received 

4,000 

Settlement discounts received 

1,500 

Cash sales 

34,000 

Credit sales at invoice price 

150,000 

Selling expenses 

32,000 

Administrative expenses 

40,000 

 

 

ANSWER 

SEESAW TIMBER MERCHANTS 

 

 

STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 MARCH 20X6 

 

 

 

 

 

 

$      

 

$      

Revenue (Note 1) 

 

 

184,000 

Cost of sales – purchases (Note 2) less discounts received  

   (116,000 – 1,500) 

 

 

 

114,500 

Gross profit  

69,500 

Expenses 

 

 

 Selling 

expenses 

 

32,000 

 

 Administrative 

expenses 

 

40,000 

 

 

 

 

 72,000 

Loss for the year (transferred to statement of financial position) 

 

 

  (2,500) 

Notes 

1 

$(34,000 + 150,000) 

2 $(120,000 

– 

4,000) 

3 

Drawings are not an expense, but an appropriation of profit 

 

 

2.3 Supplier statements 

A supplier will usually send a monthly statement showing invoices issued, credit notes, payments 

received and discounts given. It is vitally important that these statements are compared to the supplier's 

personal account in the payables ledger. Any discrepancies need to be identified and any errors 

corrected.