NEAP 2007 Accounting Trial Q1.1.2

[costargh]

Budgeting question

If anyone has this exam it would be great if you could clarify something for me. In this example you have to reconstruct the Stock Control ledger to find out how much stock is purchased on credit so that you can then reconstruct the Creditors Control ledger and find Cash payements to creditors.

My question is:
Why do you NOT include Sales returns in the stock control ledger when reconstructing it?

In the answers they dont include it and i dont know why

[fusion]

hey
sales return relates only to sales, you find out the cost price of the sales return, and report is as cost of sales in the account reconstruction for stock control. Note i havent done this paper, but im guessin thats what you're after.

[costargh]

Thanks. I think I get it. I'll go over my notes on account reconstruction later

[aksman]

The General Journal entries for a sales return does involve a stock control/cost of sales double entry for the cost of the stock returned, so fusion is right. Now that I take a second look at the exam, I find it strange that there is isn't the debit entry in the Stock Control ledger for the sales return, plus they don't give any indication of mark-up and no way of calculating the cost price 
Technically there should be an entry in the Stock Control Ledger for it.

[costargh]

Soooooo what is the answer?

[ben4386]

its right i just had a look at this, think about the cost of sales ledger

u would have

Cost of sales

DR Stock Control (credit sales)

DR Stock Control (cash sales)

CR stock control (sales returns)

the final "balance" or whats close to P/L summary is the 336000

so it wouldnt make a difference if you included cost of sales on both sides of the stock control ledger or only on the credit side at a smaller amount, i know what they did isnt technically right but it still makes sense

[costargh]

ohh ok :S

[fusion]

Is there a cost of sales entry on the debit side of the answer, if there is this would be the amount relating to the sales return.

Thread Hijack:

What have your teachers taught you to do regarding, the product cost of a very small item. An item like a sticker, that once it is allocated to the line of stock will be valued in the cents. I saw the question in checkpoints and checkpoints just said the generic it should be included as it is conidtion poistion etc. I checked on vcaa and it said it shouldnt be because of the Materiality principal, which doesnt exist now. However we still also got the principle of relevancee, and really a cents value wouldnt be useful for decision making. Anyway what im asking is, have your teachers taught to include it or not, or just your ideas on it.

[costargh]

Cents don't include.

anything that is insignifcant and wont effect decision making. use subjectivity.