Professional Documents
Culture Documents
11 000 11 000
22 900 16 500
Part B: Adjustment for Returns Inwards and Returns Outwards Returns Inwards (also known as sales returns) is deducted from Sales. Returns Outwards (also known as purchases returns) is deducted from Purchases. Example 1: From the information given below, prepare Income Statement for the year ended 31 January 2011 to calculate Gross Profit for the business of Dora. $ Sales Revenue 22 000 Purchases 12 000 Inventory 1 Feb 10 6 500 Inventory 31Jan 11 7 500 Returns Inwards 750 Returns Outwards 550 Answer: Doras Income Statement for the year ended 31 January 2011 $ $ Revenue (Sales) Less: Returns Inwards Less: Cost of Sales: Opening inventory Add Purchases Less: Returns Outwards Cost of goods available for sale Less Closing Inventory Gross Profit $ 22 000 (750) 21 250
10 450 10 800
Sales Revenue Purchases Inventory 1 Feb 10 Inventory 31Jan 11 Returns Inwards Returns Outwards Answer:
Diegos Income Statement for the year ended 31 January 2011 $ $ Revenue (Sales) Less: Returns Inwards Less: Cost of Sales: Opening inventory Add Purchases Less: Returns Outwards Cost of goods available for sale Less Closing Inventory Gross Profit
23 340 18 860
Example 3: From the information given below, prepare Income Statement for the year ended 31 January 2011 to calculate Gross Profit for the business of Sara. $ Sales Revenue 36 987 Purchases 35 874 Inventory 1 Feb 10 6 534 Inventory 31Jan 11 4 190 Returns Inwards 379 Returns Outwards 287 Answer: Saras Income Statement for the year ended 31 January 2011 $ $ Revenue (Sales) $ 36 987 (379) 36 608
Less: Cost of Sales: Opening inventory Add Purchases Less Returns Outwards Cost of goods available for sale Less Closing Inventory Gross Loss
37 931 (1 323)
12 140 9 110
Example 2: From the information given below, prepare Income Statement for the year ended 28 February 2011 to calculate Gross Profit for the business of Kane. $ 42 650 22 870 5 690 4990 450 230 2 000
Sales Revenue Purchases Inventory 1Mar 10 Inventory 28Feb11 Returns Inwards Returns Outwards Carriage Inwards
25 340 16 860
Example 3: From the information given below, prepare Income Statement for the year ended 28 February 2011 to calculate Gross Profit for the business of Dolly. $ Sales Revenue 39 400 Purchases 36 500 Inventory 1Mar 10 2 600 Inventory 28Feb11 16 200 Returns Inwards 500 Returns Outwards 350 Carriage Inwards 2 250 Answer: Dollys Income Statement for the year ended 31 February 2011 $ $ Revenue (Sales) $ 39 400 (500) 38 900
Less: Cost of Sales: Opening inventory Add Purchases Add Carriage Inwards Less: Returns Outwards Cost of goods available for sale Less Closing Inventory Gross Profit
24 800 14 100
Part D: Adjustment for Goods Taken by the Proprietor Goods taken by the proprietor for his own use reduces the amount he/ she bought for sale by the business. Therefore, goods taken by the proprietor (which can also be termed as Drawing of Goods) is deducted from purchases in the income statement.
11 840 9 410
Example 2: From the information given below, prepare Income Statement for the year ended 28 February 2011 to calculate Gross Profit for the business of Jack. $ 32 500 45 000 22 000 23 600 700 900 1 500 450
Sales Revenue Purchases Inventory 1Mar 10 Inventory 28Feb11 Returns Inwards Returns Outwards Carriage Inwards Goods taken
Example 3: From the information given below, prepare Income Statement for the year ended 28 February 2011 to calculate Gross Profit for the business of Jill. $ Sales Revenue 38 946 Purchases 29 456 Inventory 1Mar 10 3 524 Inventory 28Feb11 3 899 Returns Inwards 187 Returns Outwards 132 Carriage Inwards 400 Goods taken 256 Answer: Jills Income Statement for the year ended 31 February 2011 $ $ Revenue (Sales) $ 38 946 (187) 38 759
Less: Cost of Sales: Opening inventory Add Purchases Add Carriage Inwards Less Drawing of goods Less: Returns Outwards Cost of goods available for sale Less Closing Inventory Gross Profit
29 093 9 666