AP2

SamadM95

I need some help on AP2 especially incomplete errors and mark up/margins, I am generally ok wit the AAT practice exams but very bad with green light, the layout on green light is very different. Does anyone know any revision guides for AP2 to simplify it.

welshwizard

You say you're generally OK with the practice exams - yet almost half of it is incomplete records (which is what I assume you mean when you say 'incomplete errors').

For me the most worrying thing is that you're assuming that because you're OK with the practice assessments, you understand it all and are happy that you can apply the 'knowledge' and skills. remember, assessment questions may not appear as you expect them to and, therefore, you need to understand the topics completely rather than just learn to the assessment format. This is a common error and I am always telling my students not to rely on assessment 'formats' as you will fail if you're confronted with something totally unlike anything you're expecting.

Incomplete records require you to do a number of things in the assessment:

1. Reconstruct control accounts from given information
2. Establish opening figures using the accounting equation
3. Establish closing figures using the accounting equation and information from control accounts.
4. Establish sales, cost of sales, purchases, opening & closing inventory using mark-up and margin.

1, 2 and 3 are all Basic Accounting 1 & 2 and AP1 skills that, by now, you should be able to do standing on your head whilst 4 needs a very simple approach using a basic model:


Mark-up Model
£
%

Margin Model
£
%


Sales
120
120

Sales
120
100


Cost of sales
100
100

Cost of sales
100
83.33


Profit
20
20

Profit
20
16.67



Note that here, whilst the £'s stay the same, the % figure changes as the 100% moves position.This is the key to understanding the mark-up and margin problems. Once you understand that the cost of sales can be a % of the sales figures (margin) then you can work out the required figure. Let's look at an example:

We are told that Opening inventory is £100, Purchases is £200 and Sales were £500. We are also told that there is a 50% Profit Margin. Now, from this we can calculate the closing inventory


Opening inventory
100 (given)


Purchases
200 (given)


Closing inventory
-50


Cost of sales
250
(from Margin Model)




Margin
£
%


Sales
500 (given)
100


Cost of sales
250
50


Profit
250
50 (given)

j1994

How to calculate share of profit for distrubution for one person?