- 10 Marks
FA – L1 – Q43 – Inventory
Question
Kofi started business on 1 January 20X8. At the end of his first year of trading he had closing inventory of GH¢5,000. During 20X9 he traded continuously and at 31 December 20X9 he had inventory amounting to GH¢7,500.
Sales for 20X8 and 20X9 were GH¢120,000 and GH¢155,000 respectively and purchases were GH¢75,000 and GH¢110,000 respectively.
Required
(a) Write up the inventory account, purchases account, and revenue account for the two years.
(b) Prepare the trading account for EACH of the two years.
Answer
(A) Inventory a/c
| 20X8 | GH¢ | 20X8 | GH¢ | ||
|---|---|---|---|---|---|
| 31 Dec | Trading a/c | 5,000 | 31 Dec | Balance c/d | 5,000 |
| 20X9 | 20X9 | ||||
| 1 Jan | Balance b/d | 5,000 | 31 Dec | Trading a/c | 5,000 |
| 31 Dec | Trading a/c | 7,500 | 31 Dec | Balance c/d | 7,500 |
| 12,500 | 12,500 | ||||
| 20X9 | |||||
| 1 Jan | Balance b/d | 7,500 |
Purchases a/c
| 20X8 | GH¢ | 20X8 | GH¢ | ||
|---|---|---|---|---|---|
| Cash/Payables | 75,000 | 31 Dec | Trading a/c | 75,000 | |
| 20X9 | 20X9 | ||||
| Cash/Payables | 110,000 | 31 Dec | Trading a/c | 110,000 |
Revenue a/c
| 20X8 | GH¢ | 20X8 | GH¢ | ||
|---|---|---|---|---|---|
| 31 Dec | Trading a/c | 120,000 | Cash/receivables | 120,000 | |
| 20X9 | 20X9 | ||||
| 31 Dec | Trading a/c | 155,000 | Cash/receivables | 155,000 |
(B)
Trading accounts for the year ended
| 31 December 20X8 | 31 December 20X9 | |||
|---|---|---|---|---|
| GH¢ | GH¢ | GH¢ | GH¢ | |
| Revenue | 120,000 | 155,000 | ||
| Opening inventory | 5,000 | |||
| Purchases | 75,000 | 110,000 | ||
| 75,000 | 115,000 | |||
| Less: Closing inventory | (5,000) | (7,500) | ||
| Cost of goods sold | 70,000 | 107,500 | ||
| Gross profit | 50,000 | 47,500 |
- Tags: Financial Statements, Inventory, Ledger accounts, Purchases, Revenue, Sole Trader, Trading Account
- Level: Level 1
- Topic: Inventory
- Uploader: Samuel Duah