Financial Statements

sscorssscors Feels At HomePosts: 72Registered
Hello

does anyone know why when drawing up a statement of comprehensive income when it comes to calculating cost of sales if there has been returns outwards that it is included in the calculation and it is subtracted from the rest of the values why not added as it is income?

Example

Cost of Sales £ 000

Opening inventories 7454
Purchases 37543
Less returns outwards (1463)
= 43534
Closing inventories (8731)
=34803


Also I have found every time I calculate distribution costs /administrative costs there is something I have missed. How do you know what to include when calculating these?

Thank you for your time :001_smile:

Comments

  • SamiHSamiH Well-Known Posts: 179Registered
    Returns outward are relating to purchases which is why they are deducted from the CoS, in the same manner that returns inward are relating to sales/revenue and would be deducted from the sales/revenue value.

    If you bought £1,000 worth of goods, but returned £50 because they were faulty, you would not record £1,000 because you would have only bought £950.

    With regards to distribution and admin costs, we have been putting any expenses relating to the goods and sales of goods (incl advertising, warehouse costs, delivery costs, vehicle and plant depreciation charge, sales and delivery staff wages) to Distribution costs.

    Office and general expenses, auditors fee's, Bad Debt expense, office staff wages have been going to Administrative Costs.

    Look at what the expenses relate to and if they relate to storage or selling of goods, put to Distribution, otherwise put to Admin costs.

    Hope I havent confused you too much.

    Sam
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