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The Regulatory Framework of Financial Reporting

Example 5

During the following month, Nadim sold goods on credit to his customers for
$6,000. He already had some inventory, which cost $10,000, so he used
$1,000 worth of that inventory, and purchased further inventory at a cost of
$3,000, all of which was used to fulfil the order. He has not yet paid for this
extra inventory.

His rent bill for the month was $500 and his van hire and running costs were
$300.

He withdrew $200 from the business entity for his private use.

Required:

Present a statement of profit or loss for Nadim for the month, and a
statement of financial position at the end of the month.

Note: You will need to use the information from Example 4 to give you
starting balances on the statement of financial position.

Example 5: Solution

Statement of profit or loss for the month

$ $
Sales
Less: Cost of goods sold
–——–
Gross profit

Less expenses:
Rent
Van hire and running costs
–——–
–——–
Net profit earned
–——–

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