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

PART F: PREPARING BASIC FINANCIAL STATEMENTS 

 

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Step 2 

The cost of goods sold is also unknown, but this can be established from the gross 

profit margin and the sales for the period. 

 

 

 

$     

Sales 

 

(100%) 

 

42,000 

Gross profit 

 

(33

1

/

3

%) 

 

14,000 

Cost of goods sold 

 

(66

2

/

3

%) 

 

28,000 

 

Step 3 

The cost of the goods stolen is: 

 

$ 

Opening inventory at cost 

 

4,700 

Purchases 

 

30,000 

 

 

34,700 

Less closing inventory (after burglary) 

 

         0 

Cost of goods sold and goods stolen 

 

34,700 

Cost of goods sold (see (b) above) 

 

28,000 

Cost of goods stolen 

 

  6,700 

 

Step 4 

The cost of the goods stolen will not be included in cost of sales, and so the gross profit 

for the period is as follows. 

BEAU GULLARD 

GROSS PROFIT FOR THE SIX MONTHS TO 30 JUNE 20X9 

 

$ 

$ 

Sales 

 

 

42,000 

Less    cost of goods sold 

 

 

 opening 

inventory 

 

4,700 

 

 purchases 

 

30,000 

 

 

 

34,700 

 

 

less inventory stolen 

 

  6,700 

 

 

 

 

28,000 

Gross profit 

 

 

14,000 

 

 

6.3 Accounting for inventory destroyed, stolen or otherwise lost 

When inventory is stolen, destroyed or otherwise lost, the loss must be accounted for somehow. The 

procedure was described briefly in the earlier chapter on inventory accounting. Since the loss is not a 

trading loss, the cost of the goods lost is not included in the cost of sales, as the previous example 

showed.  

The account that is to be debited is one of two possibilities, depending on whether or not the lost goods 

were insured against the loss. 

(a) 

If the lost goods were not insured, the business must bear the loss, and the loss is shown in the 

statement of profit or loss, ie: 

DEBIT 

Expenses (eg administrative expenses) 

CREDIT Cost 

of 

sales 

(b) 

If the lost goods were insured, the business will not suffer a loss, because the insurance will pay 

back the cost of the lost goods. This means that there is no charge at all in the statement of profit 

or loss, and the appropriate double entry is: 

DEBIT 

Insurance claim account (receivable account) 

CREDIT Cost 

of 

sales 

with the cost of the loss. The insurance claim will then be a current asset, and shown in the 

statement of financial position of the business as such. When the claim is paid, the account is then 

closed by: 

DEBIT Cash 

 

CREDIT 

Insurance claim account 

 

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CHAPTER 17  

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