The Trading Account 24th September 2012.

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Presentation transcript:

The Trading Account 24th September 2012

Quote of the day……. “Is Feidir Linn!” President Obama Dublin 2011

What will we learn today? How to calculate Cost of Sales The difference between Cost of goods available for sale & Cost of Sales The layout of the Trading Account How to calculate Gross Profit/Loss

Cost of Sales – What is included? The cost of purchasing materials needed Cost of making the goods (including labour) Cost of transporting materials to the factory (Carriage in) Import or custom duty if materials came from abroad

Cost of Goods available for Sale The Cost of goods available for sale is the cost of making all the goods. Every item manufactured is included in this cost The Cost of Sales/ Cost of Goods Sold is the cost of the goods they actually sold. It does not include goods that were not sold, i.e. Closing Stock The amount of goods made may not be the same as the amount of goods sold

Example From the following information, prepare a trading account for S. Maguire for the year ended 31/12/11 Purchases €45,000; Sales €80,000; Carriage Inwards €3,500; Import duty €2,750, Opening Stock €15,000; Closing Stock €25,000.

Returns. Sometimes goods are returned. Why do you think this is?

Returns Purchases Returns/Returns Outwards Goods that were purchased by the company but are now being returned by the company. Sales Returns/Returns Inwards Goods that were sold by the company but have now been returned to them

Recap Questions Why is a trading account prepared? What is Cost of Sales/Cost of goods sold? What is cost of goods available for sale? Why is closing stock not included in cost of sales? Why are goods returned?