DFS - Help please

rach12

I have been doing the June 2004 past paper for DFS and I'm alittle confused, it is probably very simple but is just not sinking in, could someone please explain to me why the turnover and cost of sales figures include the stock sale price, not the original cost of the stock on task 1.1.

All help much appreciated........ I've no where else to go and the study book is not helping.

Thanks
Rach

Rinske

Hi Rach12,

Aswall bought the stock from Unsafey for 1860.

This means that Aswall would have listed it in the cost of sales for the 1860 which it costed them.

This also means that Unsafey has listed it their revenue figure for the 1860.

As these are intercompany sales you want to remove them completely out of the figures, so by removing 1860 out of the revenue and the cost of sales, you remove the full transaction.

It is now still listed in the consolidated balance sheet as cost of sales for 1200 (the cost for which Unsafey bought them) and in the revenue for which ever amount Aswall sold it.

Hope that helps,

Cheers,
Rinske

rach12

Thanks for that its really helps.

Thanks Rach