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

 IMPORTANT 

The cost of carriage inwards is usually added to the cost of purchases. 

The cost of carriage outwards is a selling and distribution expense in the statement of profit or loss.

BPP Tutor Toolkit Copy

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CHAPTER 7  

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  INVENTORY 

 

111 

Required 

Prepare the statement of profit or loss of Clickety Clocks for the year ended 30 June 20X6. 

Solution

 

CLICKETY CLOCKS 

STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 JUNE 20X6 

 

 $      

 $      

Revenue 

 

 162,100 

Opening inventory 

 17,000 

 

Purchases 

 75,000 

 

Carriage inwards 

   2,000 

 

 

 94,000 

 

Less closing inventory 

 15,400 

 

Cost of goods sold 

 

 78,600 

Gross profit 

 

 83,500 

Carriage outwards 

 2,500 

 

Other expenses 

 56,000 

 

 

 

 58,500 

Profit for the year  

 

 25,000 

1.7 Goods written off or written down 

A trader might be unable to sell all the goods that they purchase, because a number of things might 

happen to the goods before they can be sold. For example: 

(a) 

Goods might be lost or stolen. 

(b) 

Goods might be damaged, become worthless and so be thrown away. 

(c) 

Goods might become obsolete or out of fashion. These might be thrown away, or sold off at a 

very low price in a clearance sale. 

When goods are lost, stolen or thrown away as worthless, the business will make a loss on those goods 

because their 'sales value' will be nil. 

Similarly, when goods lose value because they have become obsolete or out of fashion, the business will