1. Cost of Sales & Inventories Mark Fielding-Pritchard mefielding.com1

2. Cost of Sales  Matching principle  If we sell 1000 apples, what is the cost of 1000 apples  See 1.1 & 1.3 Pages 179, 180  Op Inventory + Purchases – Cl Inventory  We also include carriage in  Inventory write offs also go in CofS (1.4, P182) mefielding.com2

3. Cost of Sales  Interactive Q2 P183  Dr Expenses Cr Purchases 64500  Dr Receivables Cr Other Income 38700 mefielding.com3

4. IAS2 Inventory  Interactive Q2 P183  Dr Expenses Cr Purchases 64500  Dr Receivables Cr Other Income 38700 mefielding.com4

5. IAS2 Inventory p186 mefielding.com5 DrCr 0Inventory2000Capital2000 1Purchases4300Payables4300 2Payables3600Cash3600 3Receivables8000Sales8000 4Cash3200Receivables3200 5NCA@Cost1500Cash1500 6Expenses900Cash900 7Inventory (SOFP)1800Inventory (IS)1800

6. IAS2 Inventory  Value at lower of cost, including all costs or NRV, net income from selling after all ancillary costs such as rectification, modification, commissions and non recoverable taxes mefielding.com6 ABC Cost20914 NRV23812 Lower20812 Value400012003600 Total8800

7. IAS2 Inventory  In manufacturing company inventory will consist of direct material, direct labour & direct overhead- conversion costs  Raw materials, WIP & finished goods mefielding.com7

8. IAS2 Inventory FIFO mefielding.com8 Receipt Issue CostRemainder 1 May1002000 3 May4008400 4 May200200+210 9 May300636100 11 May400630+212 18 May100240100 20 May100212 31 May212+240

9. IAS2 Inventory AVCO mefielding.com9 Receipt IssueCostAv Unit CostRemainder 1 May1002000 3 May4008402.080 4 May200416 9 May300636(624+636)/600 = 2.10 100 11 May400840 18 May100240[(200x2.10)+240] /300= 2.20 100 20 May1002.20 31 May200220

10. Mark up & Gross Margin Mark Up  Cost Plus basis  If mark up = 30% & cost is £100  Sales price will be 130 Gross Margin  % of sales price  If gross profit is 30% & cost is 140  Selling price is $200 mefielding.com10