Summary
A2 Summary Financial Accounting 188 (FINACC188)
- Course
- Institution
Summary of work covered for A2 - Chapters 10-13 and 20 This document includes steps to follow for transactions and adjustments
[Show more]
Seller
Follow
jamieanderson
Content preview
FINANCIAL ACCOUNTING,F- HAA .NET At AEEQ.UA/FtNnG-
• CHAPTER ONE •
[ Nature And Objectives Of Accounting ]
, HINA .NET#lAEEQuUAlFtNnG-
•
CHAPTER 10
10.1 THE NATURE OF PROFIT
•
main objective of entity =
show profit by selling goods / services
◦
profit =
compensation for initiatives from management 's side t compensation to owners for risk taken to invest in entity
AMT
•
PROFIT =
AMT RECEIVED FOR SALE -
PAID FOR GOOD
( income ) -
( expenses )
10.2 PROFIT DETERMINATION OF SERVICE -
PROVIDING ENTITIES
'
uses its assets , incurs expenses t applies skills / expertise to provide service
°
profit =
estimated by comparing income earned w/ expenses incurred in same period .
General ledger acc -
service
income xxx
income -
income ace .
plus : other income xxx
other income -
income ace .
less : expenses (x x x ) less : expenses
-
expense ace .
XXX
PROFIT
NET PROFIT -
convenience Used in closing -
off
S
ace
to make
reporting
.
easier
10.3 PROFIT DETERMINATION OF TRADING ENTITIES
PROFIT
•
traceries =
parch good to sell for
inventory @
is ↑
objective =
sell price ASAP t as many as possible
G- ROSS PROFIT =
RETURN ON SALES -
C -
O -
S
General ledger accounts : trade
sales sales returns ]
sales income count
xxx
-
( xxx )
less C O S convenience account
-
: -
( xxx )
-
less : C -
O -
S
trade account
_
✗✗✗
Gross profit lconvenienceacc )
G- ROSS PROFIT .
✗ ✗ ×
other income -
income account
plus : other income ✗✗ ✗
( xxx )
expense
-
less expenses account
( xxx )
:
less : trade expenses
p/ 1 account
(convenience
-
✗ ✗ ✗ NET PROFIT acc )
PROFIT
10.4 CONVENIENCE ACCOUNTS
During closing off certain created easier reporting
•
-
process =
accounts =
for
CONVENIENCE ACCOUNT ITEMS INCLUDED IN THE ACCOUNT PURCHASE OF THE ACCOUNT
•
cost Of sales opening stock, parch
, closing stock determine C -
O -
S
1- other items affecting cost of inv .
> trade account >
sales / C -
O 's > determine G- P
>
profit / loss account > G- P
,
other operating inc .
/ exp .
> determine Profit for period
period
•
Thus
,
income state . items =
grouped into 1 acc to determine p/1 for .
10.5 DETERMINING GROSS PROFIT
•
GP =
profit earned frm entity 's primary operations
Rie
R
.
Sales 15000 Sales 15000
profit frm equip-1 .
Sold 2000 less : C -
O -
S 11250
GROSS 3750
rent income 1500 PROFIT
c. 0 -
s 11250 v. determined separately
: indication of performance of
int . paid 800
trading entity regarding primary operations [ selling goods @ a profit ]
V ◦
advertising costs 300 '
expressed as a o of sales / cost price
V. aims G- Pi [ included
salaries 1400 entity =
for predetermined .
in budget ] s actual GPI .
=
determined periodically t
compare to
budgeted G- Pt .
, FINANCIAL AEEQ.UA/FtNnG- .
•
CHAPTER 10
the following factors play actual GP explains diff btwn BUDGETED / ACTUAL GP :
a role in
determining t
=
.
>
actual sales prices t discount allowed
>
actual purchases + discount received
>
loss of goods
>
accuracy of stock
taking + measurement of inventory .
G- P I. On sales price :
G- ROSS PROFIT 100
✗
sales ,
G- P -1. on cost price :
G- ROSS PROFIT 100
×
I
cost of sales
ie .
GP =
consistently realized @ 20 -1 .
On COST PRICE .
sale for year =
R 90000
CP G- p 100T
'
t =
SP . . 20 =
120
a) calculate C O S- -
100
=
90 000 ✗ 120 R 75000
,
b) calculate GP
20
=
90 000 × 120 R 15000
,
ie . GP =
consistently realised @ 20% on SP . Sales for the year
= R 90000
G- P
'
CP t =
SP . .
80 t 20 = 100
a) calculate C O S
- -
80
=
90 000 ✗ 100 R 72
000g
b) calculate GP
90000 ✗ ¥0 = R 18 000
,
10.6 ESTIMATING C. 0 'S
•
by determining G- P :
only CP of goods sold ( c. 0 -
s ) = matched w/ sales of corresp .
goods
inv
opening . xxx
plus : punch @ CP ✗✗ ✗
cost of items avail . for sale xxx
less :
closing inv .
( xxx )
COST OF SALES XXX
10.7 THE CLOSING PROCESS
@
•
end of financial period s
ledger accounts regarding income state . items =
merged in convenience accounts to calc . Pll for period which ↑ or ↓ in
equity
•
General convenience accounts :
>
C. O -
S
>
trade account
>
profit and loss
CLOSING -
OFF PROCESS =
ILLUSTRATE AS FOLLOWS :
> CRJ > PJ > PRT
> > >
CPJ 5J SRJ
Closing -
Off an exp :
Dr :
expense
CR :
p/ I
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller jamieanderson. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $8.53. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
64438 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now