DFS Section 2

lorraine1066

Is anyone else panicking? Section 1 was good, all balanced but final ratio in section 2 threw me. Am using osborne books and nowhere does it say you can use cost of sales instead of purchases in the equation! Just waffled on to cover up not doing the calculation.

ma1thew

i worke out purchases for the 2008 variance but used cos for 2007 was this correct?

lorraine1066

dfs

Not sure but at least you did a calculation of some sort!

ma1thew

you won't lose too many marks as you said you did write something! not enough to fail the section!

Moseley_21

Yeh i just did them both on cost of sales! wrote it down as purchases then realised i had no value! Thought i would use COS because at least the figures would be comparable???

acky2106

Moseley, that should be fine. I wrote that the formula was payables/purchasesx365 however, upon realising there was no purchasing figure i used cost of sales and wrote a note underneith to say it was calculated on cost of sales

Sparkz1988

trade receivable turnover per day =
trade receivables/turnover X 365 days

trade payables turnover per day =
trade payables/turnover X 365 days


is that right??

Richard

acky2106 wrote: »

Moseley, that should be fine. I wrote that the formula was payables/purchasesx365 however, upon realising there was no purchasing figure i used cost of sales and wrote a note underneith to say it was calculated on cost of sales

Thats exactly what I did.

I guess the only other thing we could have done is work out the purchase figure for ourselves as we were given cost of sales, the closing inventory for the year was on the balance sheet, and the closing inventory for the previous year would have been the opening stock!

jeskimosdad

We were taught to use cost of sales if credit purchases could not be identified. Purchases for 2008 could be calculated but for 2007 there was no opening stock figure so this could not be derived. When comparing 2 sets of ratios for different years, they are only meaningful if you take the figures in the calculations from the same source. Therefore, I reckon using cost of sales for both calcs was bob on the money.:001_unsure:

MrGofOxford

Richard wrote: »

Thats exactly what I did.

I guess the only other thing we could have done is work out the purchase figure for ourselves as we were given cost of sales, the closing inventory for the year was on the balance sheet, and the closing inventory for the previous year would have been the opening stock!

Richard is bang on the money, I used costs of sales & as soon as I handed my paper in I realised that we could figure it out:

2007 closing stock: (given)
less 2008 closing stock:(given)
add Purchases (bal figure)

= cost of sales (given)

Richard

MrGofOxford wrote: »

Richard is bang on the money, I used costs of sales & as soon as I handed my paper in I realised that we could figure it out:

2007 closing stock: (given)
less 2008 closing stock:(given)
add Purchases (bal figure)

= cost of sales (given)

Someone has since pointed out to me that we wouldnt have been able to do the same for the previous year, and as you would need to use the same formula for consistency, it was best to use cost of sales. So it looks like we have done OK by using cost of sales!!

Moseley_21

Happy Days!!