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Answers to questions

Example 3

Required:

Using the balances for purchases, sales and carriage inwards cost,
assume the accounts are now closed off and transferred into the
statement of profit or loss account, complete the trading account below
to calculate the gross profit for the year.

Example 3: Solution

Capital
Dr $ Cr $
Inventory at Inventory at
31-May 1 May Nil 31 May 31 May 1,200
31-May Purchases 8,900 31 May Sales 10,200
Carriage
31 May inwards 20
31 May Gross profit c/d 2,480
11,400 11,400

Remember that this section of the statement of profit or loss is also known as
the trading account i.e. that part of the statement of profit or loss used to
determine the gross profit for the accounting period.

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