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Inventory
Inventory in the financial statements
1.1 Inventory in the statement of profit or loss
When calculating gross profit we match the revenue generated from the sale of
goods in the year with the costs of purchasing or manufacturing those goods.
The costs of the unused inventory should not be included in this figure – as per the
pro forma below.
$ $
Sales revenue X
Opening inventory X
Purchases X
Less: Closing inventory (X)
–––
Cost of Sales (X)
–––
Gross Profit x
The closing inventory costs are carried forward into the next accounting period when
they will be matched against the revenue generated from their sale.
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