the confuzing part

[monokekie]

sorry bout double posting this but,
i still wonder. why wouldn't stock gain be understated. if the credit sale is recorded, there would be less stock in the firm's stock control account, the stock gain would be higher.
If the credit sale is not recorded, there would be more stock in the firm's stock control account, the stock gain would be lower, thus understating the stock gain???

and why wouldn't the opening balance be zero. since it is clearly stated on the question that owner contributed 20000 to commence business on 1 Jan, wouldn't it be a cash receipts which should be included in the cash flow statement instead of opening balance?

[phanphy]

Transactions for the credit sale of stock:

Debtors Control
    Sales
    GST Clearing
Cost of Sales
    Stock Control

Seeing that GST, Debtors and Stock are not included in the Profit and Loss Statement,
this means that:

Cost of Sales would be UNDERstated
Credit Sales would also be UNDERSTATED

[Ilovemathsmeth]

Yeah I didn't understand where stock gain came from :S

I hope you're right, it's what I wrote too!

[monokekie]

but sales usually include cost of sales?

stock control is thus affected,

thus stock count at the very end of the reporting period would recognise less stock gain?

[Ilovemathsmeth]

I don't know.

Stock control would show a higher value of stock. Physical stock take would mean there is a lower value of stock on shelves due to the stock going out in the omitted credit sale.

Which is why I said cost of sales would be less and sales would be less

I'm so sad now, I still don't get why it would be stock gain

Do you reckon I could get 2 of the 3 marks?

[nbalakers24]

i tihkn they are syaing that
cost of sales decreases stock

if you omit that, your are overstating stock as it should decrease

i'm not sure, i jsut wrote what phanphy  said

[phanphy]

yeah you probably would

[nbalakers24]

its also a 3 mark question, so 1 mark for one entry if stock gain is included.

[monokekie]

there's a new saying now, guys,

someone said that Net profit would be another revenue item........ :S

[nbalakers24]

It cant be because

net profit = revenue - expenses

if you understand what i'm trying to say, lol.

[monokekie]

lol, i understandd.... but the way she say it makes you believe her rofl, myfriend, she is very good at debating...

[nbalakers24]

haha

what else did she put down?

[monokekie]

she put down zero for opening entry....

[mtwtfss]

highly doubt that, cos then u could therefore also mention gross profit, adjusted GP etc.

It specifically said revenue and expense accounts  im pretty sure

[nbalakers24]

haha