1. FAC1502
Inventory
Inventory have the potential to contribute to the flow of cash to the entity.

2. The main differences between the two systems:
In the PERPETUAL INVENTORY SYSTEM e.g. selling ROLLS ROYCE motors - purchases are recorded at cost price in the INVENTORY account (asset) and a Cost of sales account is kept during the financial period. In the PERIODIC INVENTORY SYSTEM e.g. PICK n PAY - Purchases are recorded in the PURCHASES account and the cost of sales is calculated, by implication in the trading account
The main differences between the two systems:
In the PERPETUAL INVENTORY SYSTEM
e.g. selling ROLLS ROYCE motors
- purchases are recorded at cost price in the INVENTORY account (asset) and a Cost of sales account is kept during the financial period.
In the PERIODIC INVENTORY SYSTEM
e.g. PICK n PAY
- Purchases are recorded in the PURCHASES account and the cost of sales is calculated, by implication in the trading account

3. IMPORTANT COMPONENTS of a trading concern
GROSS PROFIT (determined in the trading account):
Difference between sales and the ``cost price of sales'‘
PROFIT FOR THE YEAR/PERIOD
The amount which remains from the gross profit after all expenditure necessary to manage the business has been subtracted and other income has been added in the profit or loss account.
COST PRICE OF SALES (determined in trading account)
Opening inventory + purchases (at cost price) – closing inventory (at cost price)
Proper accounting for inventory thus important in determining the cost price of sales
IMPORTANT COMPONENTS of a trading concern
GROSS PROFIT (determined in the trading account):
Difference between sales and the ``cost price of sales'‘
PROFIT FOR THE YEAR/PERIOD
The amount which remains from the gross profit after all expenditure necessary to manage the business has been subtracted and other income has been added in the profit or loss account.
COST PRICE OF SALES (determined in trading account)
Opening inventory + purchases (at cost price) – closing inventory (at cost price)
Proper accounting for inventory thus important in determining the cost price of sales

4. MARK-UP ON COST PRICE
When determining the cost of sales, it is important to establish whether the mark-up was made on the cost price or the selling price since the price that applies is taken to be 100 (100%).
Suppose the mark-up of 25% is on the cost price.
Thus:
Cost price = 100
Mark-up = 25
Selling price = 125
MARK-UP ON COST PRICE
When determining the cost of sales, it is important to establish whether the mark-up was made on the cost price or the selling price since the price that applies is taken to be 100 (100%).
Suppose the mark-up of 25% is on the cost price.
Thus:
Cost price = 100
Mark-up = 25
Selling price = 125

5. Calculate COST PRICE if:
Selling price = R75 000, %
Mark-up = 25%
Value given
What you want
R X
100
125
The selling price = R75 000, the mark-up of 25% is on cost price that means 100% + 25% = 125% and that is what you have.
You want to know the cost price of 100% in the calculation and that is R60 000s
What you have
= R60 000

6. INVENTORY SYSTEMS Perpetual & Periodic
Perpetual (continuous) inventory system
the business keep a continuous track of inventory levels for the different inventory items it sells.
Ideally suited to a business that sells items that can be easily identified, measured and a value attached to them eg. Rolls Royce cars.
Purchase of inventory is recorded directly into the inventory account at cost price
At time of sale, the cost price is transferred from the inventory account to the cost of sales account.
Gross profit can thus be determined on each sale.
INVENTORY SYSTEMS Perpetual & Periodic
Perpetual (continuous) inventory system
the business keep a continuous track of inventory levels for the different inventory items it sells.
Ideally suited to a business that sells items that can be easily identified, measured and a value attached to them eg. Rolls Royce cars.
Purchase of inventory is recorded directly into the inventory account at cost price
At time of sale, the cost price is transferred from the inventory account to the cost of sales account.
Gross profit can thus be determined on each sale.

7. In the perpetual inventory system inventory is an asset
Inventory on hand and inventory which is purchased are therefore debited at cost price in the asset account called inventory and a contra account such as creditors or bank is credited
When goods are sold, the sales account (income) is credited with the selling price and the contra account such as debtors or bank is debited.
AND
Goods are taken out of the inventory (asset) account at cost price (inventory account is credited) and debited to the cost of sales (expense) account.
In the perpetual inventory system inventory is an asset
Inventory on hand and inventory which is purchased are therefore debited at cost price in the asset account called inventory and a contra account such as creditors or bank is credited
When goods are sold, the sales account (income) is credited with the selling price and the contra account such as debtors or bank is debited.
AND
Goods are taken out of the inventory (asset) account at cost price (inventory account is credited) and debited to the cost of sales (expense) account.

8. Perpetual inventory system
The following exercise illustrates the perpetual inventory system: R
Inventory on 1 January 20.1.
10 000
Transactions for year up to 31 December 20.1
Credit purchases
50 000
Cash purchases
40 000
Credit sales (mark-up on cost price is 25%)
75 000
Cash sales (mark-up on cost price is 25%)
25 000
The following exercise illustrates the perpetual inventory system in the general ledger:

9. Perpetual inventory system
The following exercise illustrates the perpetual inventory system: R
Inventory on 1 January 20.1.
10 000
Transactions for year up to 31 December 20.1
Credit purchases
50 000
Cash purchases
40 000
Credit sales (mark-up on cost price is 25%)
75 000
Cash sales (mark-up on cost price is 25%)
25 000
The opening balance of Inventory on 1 January 20.1 R

10. General Ledger Dr Inventory Cr Dr Sales Cr Date Detail Fol R 20.1
Jan 1
Balance
b/d
10 000
Dec 31
Cost of sales
60 000
Creditors control
50 000
20 000
Bank
40 000
c/d
20.2
Dr Sales Cr
Debit Inventory with the opening balance of R10 000
Date
Detail
Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000

11. Perpetual inventory system
The following exercise illustrates the perpetual inventory system: R
Inventory on 1 January 20.1.
10 000
Transactions for year up to 31 December 20.1
Credit purchases
50 000
Cash purchases
40 000
Credit sales (mark-up on cost price is 25%)
75 000
Cash sales (mark-up on cost price is 25%)
25 000
Transactions for year up to 31 December 20.1, Credit purchases of R50 000

12. General Ledger Dr Inventory Cr Dr Sales Cr Date Detail Fol R 20.1
Jan 1
Balance
b/d
10 000
Dec 31
Cost of sales
60 000
Creditors control
50 000
20 000
Bank
40 000
c/d
20.2
Dr Sales Cr
Debit Inventory with Creditors control of R50 000
Date
Detail
Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000

13. Perpetual inventory system
The following exercise illustrates the perpetual inventory system: R
Inventory on 1 January 20.1.
10 000
Transactions for year up to 31 December 20.1
Credit purchases
50 000
Cash purchases
40 000
Credit sales (mark-up on cost price is 25%)
75 000
Cash sales (mark-up on cost price is 25%)
25 000
Transactions for year up to 31 December 20.1, Cash purchases of R40 000

14. General Ledger Dr Inventory Cr Dr Sales Cr Date Detail Fol R 20.1
Jan 1
Balance
b/d
10 000
Dec 31
Cost of sales
60 000
Creditors control
50 000
20 000
Bank
40 000
c/d
20.2
Dr Sales Cr
Debit Inventory with Bank of R40 000
Date
Detail
Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000

15. Perpetual inventory system
The following exercise illustrates the perpetual inventory system: R
Inventory on 1 January 20.1.
10 000
Transactions for year up to 31 December 20.1
Credit purchases
50 000
Cash purchases
40 000
Credit sales (mark-up on cost price is 25%)
75 000
Cash sales (mark-up on cost price is 25%)
25 000
Transactions for year up to 31 December 20.1, Credit sales (mark-up on cost price is 25%) of R75 000

16. General Ledger Dr Inventory Cr Dr Sales Cr Date Detail Fol R 20.1
Jan 1
Balance
b/d
10 000
Dec 31
Cost of sales
60 000
Creditors control
50 000
20 000
Bank
40 000
c/d
20.2
Dr Sales Cr
Credit Sales with Debtors control of R75 000
Date
Detail
Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000

17. Calculate COST PRICE if:
Selling price = R75 000, %
Mark-up = 25%
Value given
What you want
R X
100
125
The selling price = R75 000, the mark-up of 25% is on cost price that means 100% + 25% = 125% and that is what you have.
You want to know the cost price of 100% in the calculation and that is R60 000s
What you have
= R60 000

18. General Ledger Dr Inventory Cr Dr Sales Cr Date Detail Fol R 20.1
Jan 1
Balance
b/d
10 000
Dec 31
Cost of sales
60 000
Creditors control
50 000
20 000
Bank
40 000
c/d
20.2
Dr Sales Cr
The cost price is R Credit Inventory with Cost of sales of R60 000
Date
Detail
Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000

19. General Ledger Dr Cost of sales Cr Dr Trading account Cr Date Detail
Fol R
20.1
Dec 31
Inventory
60 000
Trading account
80 000
20 000
Dr Trading account Cr
Date
Detail
Fol R
20.1
Dec 31
Cost of sales
80 000
Sales
Profit or Loss
(Gross profit)
20 000
Debit Cost of sales with Inventory of R

20. Perpetual inventory system
The following exercise illustrates the perpetual inventory system: R
Inventory on 1 January 20.1.
10 000
Transactions for year up to 31 December 20.1
Credit purchases
50 000
Cash purchases
40 000
Credit sales (mark-up on cost price is 25%)
75 000
Cash sales (mark-up on cost price is 25%)
25 000
Transactions for year up to 31 December 20.1, Cash sales (mark-up on cost price is 25%) of R25 000

21. General Ledger Dr Inventory Cr Dr Sales Cr Date Detail Fol R 20.1
Jan 1
Balance
b/d
10 000
Dec 31
Cost of sales
60 000
Creditors control
50 000
20 000
Bank
40 000
c/d
20.2
Dr Sales Cr
Credit Sales with Bank of R25 000
Date
Detail
Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000

22. Calculate COST PRICE if:
Selling price = R25 000, %
Mark-up = 25%
Value given
What you want
R X
100
125
The selling price = R25 000, the mark-up of 25% is on cost price that means 100% + 25% = 125% and that is what you have.
You want to know the cost price of 100% in the calculation and that is R20 000s
What you have
= R20 000

23. General Ledger Dr Inventory Cr Dr Sales Cr Date Detail Fol R 20.1
Jan 1
Balance
b/d
10 000
Dec 31
Cost of sales
60 000
Creditors control
50 000
20 000
Bank
40 000
c/d
20.2
Dr Sales Cr
The cost price is R Credit Inventory with Cost of sales of R20 000
Date
Detail
Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000

24. General Ledger Dr Cost of sales Cr Dr Trading account Cr Date Detail
Fol R
20.1
Dec 31
Inventory
60 000
Trading account
80 000
20 000
Dr Trading account Cr
Date
Detail
Fol R
20.1
Dec 31
Cost of sales
80 000
Sales
Profit or Loss
(Gross profit)
20 000
Debit Cost of sales with Inventory of R

25. General Ledger Dr Inventory Cr Dr Sales Cr Date Detail Fol R 20.1
Jan 1
Balance
b/d
10 000
Dec 31
Cost of sales
60 000
Creditors control
50 000
20 000
Bank
40 000
c/d
20.2
Dr Sales Cr
The closing balance of the inventory account (asset) represents the closing inventory
Date
Detail
Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000

26. General Ledger Dr Inventory Cr Dr Sales Cr Date Detail Fol R 20.1
Jan 1
Balance
b/d
10 000
Dec 31
Cost of sales
60 000
Creditors control
50 000
20 000
Bank
40 000
c/d
20.2
Dr Sales Cr
The gross profit, which is also called the trading profit, is determined in the trading account.
The details which are required to calculate the gross profit or loss are transferred to the trading account by means of the general journal.
The sales account is debited (sales are closed).
Date
Detail
Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000

27. General Ledger Dr Cost of sales Cr Dr Trading account Cr Date Detail
Fol R
20.1
Dec 31
Inventory
60 000
Trading account
80 000
20 000
Dr Trading account Cr
Date
Detail
Fol R
20.1
Dec 31
Cost of sales
80 000
Sales
Profit or Loss
(Gross profit)
20 000
and the trading account is credited

28. General Ledger Dr Cost of sales Cr Dr Trading account Cr Date Detail
Fol R
20.1
Dec 31
Inventory
60 000
Trading account
80 000
20 000
Dr Trading account Cr
Date
Detail
Fol R
20.1
Dec 31
Cost of sales
80 000
Sales
Profit or Loss
(Gross profit)
20 000
The Cost of sales account is credited and the Trading account is debited

29. General Ledger Dr Cost of sales Cr Dr Trading account Cr Date Detail
Fol R
20.1
Dec 31
Inventory
60 000
Trading account
80 000
20 000
Dr Trading account Cr
Date
Detail
Fol R
20.1
Dec 31
Cost of sales
80 000
Sales
Profit or Loss
(Gross profit)
20 000
The gross profit is the difference between sales and cost of sales. The gross profit is transferred to the profit or loss account. Where
cost of sales is more than sales, the result is a gross loss.
Debit Trading account with Profit or Loss of R20 000

30. Periodic inventory system
The purchase of inventory is recorded in the purchases account and not an inventory account.
Inventory returned - recorded in a purchases returns account.
Cost of sales is not determined at the time of the recording of the sale but can thus only be determined at the end of the financial period after a physical inventory count has been done.
Periodic inventory system
The purchase of inventory is recorded in the purchases account and not an inventory account.
Inventory returned - recorded in a purchases returns account.
Cost of sales is not determined at the time of the recording of the sale but can thus only be determined at the end of the financial period after a physical inventory count has been done.

31. A purchases and purchases returns accounts are kept
No cost of sales account as the cost of sales is determined in the Trading account
A purchases and purchases returns accounts are kept
A physical inventory count is essential
It is very important, in assignments and in the examination, to make sure that you know which inventory system a business uses as this will determine how the transactions will be recorded in the subsidiary journals and the general ledger.
No cost of sales account as the cost of sales is determined in the Trading account
A purchases and purchases returns accounts are kept
A physical inventory count is essential
It is very important, in assignments and in the examination, to make sure that you know which inventory system a business uses as this will determine how the transactions will be recorded in the subsidiary journals and the general ledger.

32. The opening balance on the inventory account (asset) is held in the books throughout the financial period, which is usually a year, without any other entries.
Inventory purchased is recorded (debited) at cost price in the purchases account (expenditure) and the contra account, for instance creditors or bank, is credited. The purchases account is closed off at the end of the financial year, to the trading account by means of a general journal entry (debit trading account and credit purchases account).
When goods are sold, the sales account (income) is credited with the selling price and the contra account, say bank or debtors, is debited.
The opening balance on the inventory account (asset) is held in the books throughout the financial period, which is usually a year, without any other entries.
Inventory purchased is recorded (debited) at cost price in the purchases account (expenditure) and the contra account, for instance creditors or bank, is credited. The purchases account is closed off at the end of the financial year, to the trading account by means of a general journal entry (debit trading account and credit purchases account).
When goods are sold, the sales account (income) is credited with the selling price and the contra account, say bank or debtors, is debited.

33. In this system a cost of sales account is not kept.
A physical inventory count is undertaken to determine the closing inventory (usually at cost price - R in the exercise). To record this figure, the inventory account is debited and the trading account is credited.
In this system a cost of sales account is not kept.
In the trading account the opening inventory is added to purchases. Closing inventory is deducted (the trading account is credited) and the cost of sales is calculated.
A physical inventory count is undertaken to determine the closing inventory (usually at cost price - R in the exercise). To record this figure, the inventory account is debited and the trading account is credited.
In this system a cost of sales account is not kept.
In the trading account the opening inventory is added to purchases. Closing inventory is deducted (the trading account is credited) and the cost of sales is calculated.

34. Periodic inventory system
Inventory on 1 January 20.1
Transactions for year up to 31 December 20.1:
Credit purchases
Cash purchases
Credit sales (mark-up on cost price is 25%)
Cash sales (mark-up on cost price is 25%)
Inventory on 31 December 20.1
10 000
50 000
40 000
75 000
25 000
20 000
The following exercise illustrates the periodic inventory system in the general ledger:

35. Periodic inventory system
Inventory on 1 January 20.1
Transactions for year up to 31 December 20.1:
Credit purchases
Cash purchases
Credit sales (mark-up on cost price is 25%)
Cash sales (mark-up on cost price is 25%)
Inventory on 31 December 20.1
10 000
50 000
40 000
75 000
25 000
20 000
The opening balance of Inventory on 1 January 20.1 R

36. General Ledger Dr Inventory Cr Dr Purchases Cr Date Detail Fol R 20.1
Jan 1
Balance
b/d
10 000
Dec 31
Trading account
20.2
20 000
Dr Purchases Cr
Date
Detail
Fol R
20.1
Dec 31
Creditors control
50 000
Trading account
90 000
Bank
40 000
Debit Inventory with the opening balance of R10 000

37. General Ledger Dr Inventory Cr Dr Purchases Cr Date Detail Fol R 20.1
Jan 1
Balance
b/d
10 000
Dec 31
Trading account
20.2
20 000
Dr Purchases Cr
Date
Detail
Fol R
20.1
Dec 31
Creditors control
50 000
Trading account
90 000
Bank
40 000
Credit Inventory with Trading account of R10 000

38. General Ledger Dr Sales Cr Dr Trading account Cr Date Detail Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000
Dr Trading account Cr
Date
Detail
Fol R
20.1
Dec 31
Inventory (open)
10 000
Sales
Purchases
90 000
Inventory (close)
20 000
Profit or Loss
(gross profit)
Debit Trading account with Inventory (opening) of R10 000

39. Periodic inventory system
Inventory on 1 January 20.1
Transactions for year up to 31 December 20.1:
Credit purchases
Cash purchases
Credit sales (mark-up on cost price is 25%)
Cash sales (mark-up on cost price is 25%)
Inventory on 31 December 20.1
10 000
50 000
40 000
75 000
25 000
20 000
Transactions for year up to 31 December 20.1, Credit purchases of R50 000

40. General Ledger Dr Inventory Cr Dr Purchases Cr Date Detail Fol R 20.1
Jan 1
Balance
b/d
10 000
Dec 31
Trading account
20.2
20 000
Dr Purchases Cr
Date
Detail
Fol R
20.1
Dec 31
Creditors control
50 000
Trading account
90 000
Bank
40 000
Debit Purchases with Creditors control of R50 000

41. Periodic inventory system
Inventory on 1 January 20.1
Transactions for year up to 31 December 20.1:
Credit purchases
Cash purchases
Credit sales (mark-up on cost price is 25%)
Cash sales (mark-up on cost price is 25%)
Inventory on 31 December 20.1
10 000
50 000
40 000
75 000
25 000
20 000
Transactions for year up to 31 December 20.1, Cash purchases of R40 000

42. General Ledger Dr Inventory Cr Dr Purchases Cr Date Detail Fol R 20.1
Jan 1
Balance
b/d
10 000
Dec 31
Trading account
20.2
20 000
Dr Purchases Cr
Date
Detail
Fol R
20.1
Dec 31
Creditors control
50 000
Trading account
90 000
Bank
40 000
Debit Purchases with Bank of R40 000

43. Periodic inventory system
Inventory on 1 January 20.1
Transactions for year up to 31 December 20.1:
Credit purchases
Cash purchases
Credit sales (mark-up on cost price is 25%)
Cash sales (mark-up on cost price is 25%)
Inventory on 31 December 20.1
10 000
50 000
40 000
75 000
25 000
20 000
Transactions for year up to 31 December 20.1, Credit sales (mark-up on cost price is 25%) of R75 000

44. General Ledger Dr Sales Cr Dr Trading account Cr Date Detail Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000
Dr Trading account Cr
Date
Detail
Fol R
20.1
Dec 31
Inventory (open)
10 000
Sales
Purchases
90 000
Inventory (close)
20 000
Profit or Loss
(gross profit)
Credit sales with Debtors control of R75 000

45. Periodic inventory system
Inventory on 1 January 20.1
Transactions for year up to 31 December 20.1:
Credit purchases
Cash purchases
Credit sales (mark-up on cost price is 25%)
Cash sales (mark-up on cost price is 25%)
Inventory on 31 December 20.1
10 000
50 000
40 000
75 000
25 000
20 000
Transactions for year up to 31 December 20.1, Cash sales (mark-up on cost price is 25%) of R25 000

46. General Ledger Dr Sales Cr Dr Trading account Cr Date Detail Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000
Dr Trading account Cr
Date
Detail
Fol R
20.1
Dec 31
Inventory (open)
10 000
Sales
Purchases
90 000
Inventory (close)
20 000
Profit or Loss
(gross profit)
Credit sales with Bank of R25 000

47. Periodic inventory system
Inventory on 1 January 20.1
Transactions for year up to 31 December 20.1:
Credit purchases
Cash purchases
Credit sales (mark-up on cost price is 25%)
Cash sales (mark-up on cost price is 25%)
Inventory on 31 December 20.1
10 000
50 000
40 000
75 000
25 000
20 000
Transactions for year up to 31 December 20.1, Inventory on 31 December 20.1 of R20 000

48. General Ledger Dr Inventory Cr Dr Purchases Cr Date Detail Fol R 20.1
Jan 1
Balance
b/d
10 000
Dec 31
Trading account
20.2
20 000
Dr Purchases Cr
Date
Detail
Fol R
20.1
Dec 31
Creditors control
50 000
Trading account
90 000
Bank
40 000
Debit Inventory with Trading account of R20 000

49. General Ledger Dr Sales Cr Dr Trading account Cr Date Detail Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000
Dr Trading account Cr
Date
Detail
Fol R
20.1
Dec 31
Inventory (open)
10 000
Sales
Purchases
90 000
Inventory (close)
20 000
Profit or Loss
(gross profit)
Credit Trading account with Inventory (closing) of R20 000

50. General Ledger Dr Sales Cr Dr Trading account Cr Date Detail Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000
Dr Trading account Cr
Date
Detail
Fol R
20.1
Dec 31
Inventory (open)
10 000
Sales
Purchases
90 000
Inventory (close)
20 000
Profit or Loss
(gross profit)
The gross profit, which is also called the trading profit, is determined in the trading account.
The details which are required to calculate the gross profit or loss are transferred to the trading account by means of the general journal.
The sales account is debited and the trading account is credited (sales are closed).

51. General Ledger Dr Inventory Cr Dr Purchases Cr Date Detail Fol R 20.1
Jan 1
Balance
b/d
10 000
Dec 31
Trading account
20.2
20 000
Dr Purchases Cr
Date
Detail
Fol R
20.1
Dec 31
Creditors control
50 000
Trading account
90 000
Bank
40 000
Credit Purchases with Trading account of R90 000

52. General Ledger Dr Sales Cr Dr Trading account Cr Date Detail Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000
Dr Trading account Cr
Date
Detail
Fol R
20.1
Dec 31
Inventory (open)
10 000
Sales
Purchases
90 000
Inventory (close)
20 000
Profit or Loss
(gross profit)
Debit Trading account with Purchases of R90 000

53. General Ledger Dr Sales Cr Dr Trading account Cr Date Detail Fol R
20.1
Dec 31
Trading account
Debtors control
75 000
Bank
25 000
Dr Trading account Cr
Date
Detail
Fol R
20.1
Dec 31
Inventory (open)
10 000
Sales
Purchases
90 000
Inventory (close)
20 000
Profit or Loss
(gross profit)
The gross profit is the difference between sales and cost of sales. The gross profit is transferred to the profit or loss account. Where
cost of sales is more than sales, the result is a gross loss.
Debit Trading account with Profit or Loss of R20 000

54. DRAWINGS AND DONATIONS OF INVENTORY
Drawings and donations of inventory are recorded by means of the general journal at cost price.
Please study the following table carefully
Drawings and donations are not exempted from VAT. The VAT is, however, calculated on the Cost price and must be credited to the
VAT Output account.