2.10 cost of sales

11
2.10 COST OF SALES

Upload: vce-accounting-michael-allison

Post on 15-Jul-2015

45 views

Category:

Education


1 download

TRANSCRIPT

Page 1: 2.10 Cost of Sales

2.10

COST OF SALES

Page 3: 2.10 Cost of Sales

© Michael Allison. Author’s permission required for external use.

A sports store sells a pair of runners for cash for $200…

But how much Profit has the business made?

Business Customer

Assets LiabilitiesOwner’s

Equity= +

Cash $200

$200 $0 $200

Capital $200

2.10 COST OF SALES

Page 4: 2.10 Cost of Sales

© Michael Allison. Author’s permission required for external use.

Why isn’t the firm’s Profit the ful l $200?

Because, before the firm sold the shoes, the firm bought the shoes for $50

The $50 the firm paid for the shoes is an Expense called “Cost of Sales”

Business CustomerSupplier

Assets LiabilitiesOwner’s

Equity= +

Cash $200

$150 $0 $150

Capital $200

Inventory $50 Capital $50

2.10 COST OF SALES

Page 5: 2.10 Cost of Sales

© Michael Allison. Author’s permission required for external use.

Recording sales of stock requires two items to be entered – a firm sold stock

for $1 ,000 plus GST of $100 which original ly cost $400

First item – the sale: the business is earning revenue and collecting GST.

Cash sale

Credit sale

2.10 COST OF SALES

Assets Liabilities Owner’s

Equity

Cash at Bank Debtors Stock GST Liability Creditors Loan Capital

1,100 100 1,100

Assets Liabilities Owner’s

Equity

Cash at Bank Debtors Stock GST Liability Creditors Loan Capital

1,100 100 1,100

Assets Liabilities Owner’s

Equity

Cash at Bank Debtors Stock GST Liability Creditors Loan Capital

1,100 100 1,100

Assets Liabilities Owner’s

Equity

Cash at Bank Debtors Stock GST Liability Creditors Loan Capital

1,100 100 1,000

Assets Liabilities Owner’s

Equity

Cash at Bank Debtors Stock GST Liability Creditors Loan Capital

1,100 100 1,000

Assets Liabilities Owner’s

Equity

Cash at Bank Debtors Stock GST Liability Creditors Loan Capital

1,100 100 1,000

Assets Liabilities Owner’s

Equity

Cash at Bank Debtors Stock GST Liability Creditors Loan Capital

1,100 100 1,000

Assets Liabilities Owner’s

Equity

Cash at Bank Debtors Stock GST Liability Creditors Loan Capital

1,100 100 1,000

Page 6: 2.10 Cost of Sales

© Michael Allison. Author’s permission required for external use.

Recording sales of stock requires two items to be entered – a firm sold stock

for $1 ,000 plus GST of $100 which original ly cost $400

Second item – the cost of sale: stock is being sacrificed to make a sale. This is

an expense it is called cost of sales

Cost of sale

2.10 COST OF SALES

Assets Liabilities Owner’s

Equity

Cash at Bank Debtors Stock GST Liability Creditors Loan Capital

400 400

Assets Liabilities Owner’s

Equity

Cash at Bank Debtors Stock GST Liability Creditors Loan Capital

400 400

Assets Liabilities Owner’s

Equity

Cash at Bank Debtors Stock GST Liability Creditors Loan Capital

400 400

Page 7: 2.10 Cost of Sales

© Michael Allison. Author’s permission required for external use.

What is Cost o f Sa les ?

When stock is sold, it decreases the Stock [Asset] balance

This amount is effectively transferred into the Cost of Sales [E] account

E.g. A firm makes a sale of $800 plus $80 GST (cost price of the stock sold was $300)

Stock $100 Stock $100 Stock $100

Stock $100 Stock $100 Stock $100

Stock $100 Stock $100 Stock $100

1. Before sale – firm has $900 worth

of Stock [Asset]in its backroom

2. Firm sells $300 worth of stock

3. Value of the stock sold is transferred into an

Expense account called Cost of Sales

Cost of Sales [Expense]4. Value of Stock [Asset] is now $600

4. Value of Cost of Sales [Expense] is

$300

2.10 COST OF SALES

Page 8: 2.10 Cost of Sales

© Michael Allison. Author’s permission required for external use.

Transact ion #5: sold goods for cash $20,000 plus $2,000 GST (the cost price

of the goods sold was $9,000). . .

2.10 COST OF SALES

A L OE= + 13,000 2,000 11,000

Balance Sheet

Assets $ Liabilities $

Cash at bank 89000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 2500

Stock 15000 Owner’s Equity

Capital 80000

TOTAL ASSETS 116500 TOTAL EQUITIES 116500

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

22,000 2,000 20,000

9,000 9,000

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

22,000 2,000 20,000

9,000 9,000

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

22,000 2,000 20,000

9,000 9,000

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

22,000 2,000 20,000

9,000 9,000

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

22,000 2,000 20,000

9,000 9,000

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

22,000 2,000 20,000

9,000 9,000

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

22,000 2,000 20,000

9,000 9,000

Balance Sheet

Assets $ Liabilities $

Cash at bank 89000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 2500

Stock 15000 Owner’s Equity

Capital 80000

TOTAL ASSETS 116500 TOTAL EQUITIES 116500

Balance Sheet

Assets $ Liabilities $

Cash at bank 111000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 2500

Stock 15000 Owner’s Equity

Capital 80000

TOTAL ASSETS 116500 TOTAL EQUITIES 116500

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

22,000 2,000 20,000

9,000 9,000

Balance Sheet

Assets $ Liabilities $

Cash at bank 89000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 2500

Stock 15000 Owner’s Equity

Capital 80000

TOTAL ASSETS 116500 TOTAL EQUITIES 116500

Balance Sheet

Assets $ Liabilities $

Cash at bank 111000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 15000 Owner’s Equity

Capital 80000

TOTAL ASSETS 116500 TOTAL EQUITIES 116500

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

22,000 2,000 20,000

9,000 9,000

Balance Sheet

Assets $ Liabilities $

Cash at bank 89000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 2500

Stock 15000 Owner’s Equity

Capital 80000

TOTAL ASSETS 116500 TOTAL EQUITIES 116500

Balance Sheet

Assets $ Liabilities $

Cash at bank 111000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 80000

TOTAL ASSETS 116500 TOTAL EQUITIES 116500

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

22,000 2,000 20,000

9,000 9,000

Balance Sheet

Assets $ Liabilities $

Cash at bank 89000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 2500

Stock 15000 Owner’s Equity

Capital 80000

TOTAL ASSETS 116500 TOTAL EQUITIES 116500

Balance Sheet

Assets $ Liabilities $

Cash at bank 111000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 91000

TOTAL ASSETS 116500 TOTAL EQUITIES 116500

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

22,000 2,000 20,000

9,000 9,000

Balance Sheet

Assets $ Liabilities $

Cash at bank 89000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 2500

Stock 15000 Owner’s Equity

Capital 80000

TOTAL ASSETS 116500 TOTAL EQUITIES 116500

Balance Sheet

Assets $ Liabilities $

Cash at bank 111000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 91000

TOTAL ASSETS 127500 TOTAL EQUITIES 116500

Balance Sheet

Assets $ Liabilities $

Cash at bank 89000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 2500

Stock 15000 Owner’s Equity

Capital 80000

TOTAL ASSETS 116500 TOTAL EQUITIES 116500

Balance Sheet

Assets $ Liabilities $

Cash at bank 111000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 91000

TOTAL ASSETS 127500 TOTAL EQUITIES 127500

Page 9: 2.10 Cost of Sales

© Michael Allison. Author’s permission required for external use.

Transact ion #6: paid wages of $500.. .

2.10 COST OF SALES

A L OE= + 500 0 500

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

500 500

Balance Sheet

Assets $ Liabilities $

Cash at bank 111000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 91000

TOTAL ASSETS 127500 TOTAL EQUITIES 127500

Balance Sheet

Assets $ Liabilities $

Cash at bank 110500 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 91000

TOTAL ASSETS 127500 TOTAL EQUITIES 127500

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

500 500

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

500 500

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

500 500

Balance Sheet

Assets $ Liabilities $

Cash at bank 111000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 91000

TOTAL ASSETS 127500 TOTAL EQUITIES 127500

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

500 500

Balance Sheet

Assets $ Liabilities $

Cash at bank 111000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 91000

TOTAL ASSETS 127500 TOTAL EQUITIES 127500

Balance Sheet

Assets $ Liabilities $

Cash at bank 110500 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 90500

TOTAL ASSETS 127500 TOTAL EQUITIES 127500

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

500 500

Balance Sheet

Assets $ Liabilities $

Cash at bank 111000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 91000

TOTAL ASSETS 127500 TOTAL EQUITIES 127500

Balance Sheet

Assets $ Liabilities $

Cash at bank 110500 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 90500

TOTAL ASSETS 127000 TOTAL EQUITIES 127500

Balance Sheet

Assets $ Liabilities $

Cash at bank 111000 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 91000

TOTAL ASSETS 127500 TOTAL EQUITIES 127500

Balance Sheet

Assets $ Liabilities $

Cash at bank 110500 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 90500

TOTAL ASSETS 127000 TOTAL EQUITIES 127000

Page 10: 2.10 Cost of Sales

© Michael Allison. Author’s permission required for external use.

Transact ion #7: the owner made cash drawings of $1,000.. .

2.10 COST OF SALES

A L OE= + 1,000 0 1,000

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

1,000 1,000

Balance Sheet

Assets $ Liabilities $

Cash at bank 110500 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 90500

TOTAL ASSETS 127000 TOTAL EQUITIES 127000

Balance Sheet

Assets $ Liabilities $

Cash at bank 109500 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 90500

TOTAL ASSETS 127000 TOTAL EQUITIES 127000

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

1,000 1,000

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

1,000 1,000

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

1,000 1,000

Balance Sheet

Assets $ Liabilities $

Cash at bank 110500 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 90500

TOTAL ASSETS 127000 TOTAL EQUITIES 127000

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

1,000 1,000

Balance Sheet

Assets $ Liabilities $

Cash at bank 110500 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 90500

TOTAL ASSETS 127000 TOTAL EQUITIES 127000

Balance Sheet

Assets $ Liabilities $

Cash at bank 109500 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 89500

TOTAL ASSETS 127000 TOTAL EQUITIES 127000

Assets Liabilities Owner’s

Equity

Cash at Bank Stock Shop Fittings GST Liability Creditors Loan Capital

1,000 1,000

Balance Sheet

Assets $ Liabilities $

Cash at bank 110500 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 90500

TOTAL ASSETS 127000 TOTAL EQUITIES 127000

Balance Sheet

Assets $ Liabilities $

Cash at bank 109500 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 89500

TOTAL ASSETS 126000 TOTAL EQUITIES 127000

Balance Sheet

Assets $ Liabilities $

Cash at bank 110500 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 90500

TOTAL ASSETS 127000 TOTAL EQUITIES 127000

Balance Sheet

Assets $ Liabilities $

Cash at bank 109500 Loan 20000

Shop fittings 10000 Creditors 16500

GST refund 500

Stock 6000 Owner’s Equity

Capital 89500

TOTAL ASSETS 126000 TOTAL EQUITIES 126000

Page 11: 2.10 Cost of Sales

© Michael Allison. Author’s permission required for external use.

TASK

In-class Homework

Ex2.5 – March 5th and 6th X

Ex2.6 X

Ex2.7 X

Ex2.8 X

Ex2.9 X

Ex2.10 X