1. Class 12B
17th September 2012
“The only person who never makes a mistake is the person who never does anything”
Theodore Roosevelt

2. What will we learn today?
What a Trading Account is
Why it is prepared
What Cost of Sales is and how it is calculated
What a Gross Profit/Loss is and how it is calculated

3. The Trading Account
A profit is the money you make when you sell something for more than you paid for it.
A loss is the money you lose when you sell something for less than you paid for it

4. The Trading Account
Cost of Sales: The costs of making the goods you sold

5. Case Study Cadbury’s Dairy Milk Selling Price of 1 bar = €1
Cost of making bar = €0.60
Profit = €0.40
What if they sold 30 bars?

6. Case Study How many types of bars do Cadbury’s make? LOADS!!!
It can be hard to keep track of all of the costs and also the sales.
This is why we use the sales and purchases A/C

7. The Trading Account
The Trading Account records all details about the goods or services that were bought and sold by a business during the previous year.
The Trading Period refers to the length of time the final accounts are prepared for.

8. Question Maynooth Ltd Sales €60,000; Cost of Sales €40,000
Gross Profit???
Ireland Ltd
Sales €75,000; Cost of Sales €30,000

9. Cost of Sales
The Cost of Sales is the total amount it cost the firm to produce the goods they actually sold.
What costs are included here?

10. Example
Gold Ltd
Purchases €50,000; Carriage Inwards €4,000; Import duty €5,000.
Cost of Sales ???

11. Question
Diamond Ltd
Purchases €40,000; Carriage Inwards €5,000; Import duty €6,000.
Cost of Sales ???

12. Stock
Opening Stock is the cost of goods held in stock at the start of the trading period
Closing Stock is the cost of goods held in stock at the end of the trading period

13. Example
Opening Stock €15,000; Purchases €40,000; Carriage Inwards €3,000; Closing Stock €5,000
Cost of Sales???

14. Question
Ruby Ltd
Opening Stock €10,000; Purchases €55,000; Carriage Inwards €6,000; Closing Stock €15,000
Cost of Sales???

15. Self-Test Questions What is a Trading Account? Why is it prepared?
What is Cost of Sales?
How is it calculated?
What is a Gross Profit/Loss?