Anyone got any ideas on this?

Kelly7
Kelly7 Well-KnownRegistered Posts: 218
Hi all

I have a question which even my teachers couldn't work out at college so I wondered if anyone on here knew the answer.

All purchases are made on credit, the balance of trade payables on 1st Jan 2014 is forecast to be 45,000. The total purchases for the year is forecast to be 295,000. The information on the income statement provided says Purchases are £300,000.

The answer is that the change in payables is -5000 which I can see which figures they've used but why is the £45,000 disregarded?

Thanks for any help.

Kelly

Comments

  • Nps
    Nps Experienced Mentor Registered Posts: 782
    It's a very badly worded question regardless as it's not clear if the income statement is for the previous year, or if it's the one at the end of the year. I answered on the assumption that it was at the end of the year but now I think it's the one available when the budgets are forecasted (doesn't really matter as my reply got lost whilst being posted anyway - damn forum!) Essentially the answer would be the same though, the 45,000 is irrelevant, it could be any figure, the point which I think is being made is that it will decrease by £5000 as the purchases are expected to decrease by 5,000 so payables will be owed 5,000 less at the end of this year than last year (only in theory though as in practice the situation could be very different). Does the question go on to ask about Trade Payable days as the 45,000 would be relevant for that calculation?
  • Kelly7
    Kelly7 Well-Known Registered Posts: 218
    Ahh so you think the £45,000 in included in the payables figure already? No it doesn't ask about the payable days after.

    I took my exam this morning and it was horrible, definitely have to re-take. I've heard that the AAT site is closing for all of August though so we are going to have to wait until September to re-take. Wish it had been an earlier exam rather than my last.

    Thank you for your help. I hope I can go on and a bit like you with the help you give to people.

    Kelly xxx
  • topcat
    topcat Trusted Regular Registered Posts: 452
    Kelly7 wrote: »
    Ahh so you think the £45,000 in included in the payables figure already? No it doesn't ask about the payable days after.

    I took my exam this morning and it was horrible, definitely have to re-take. I've heard that the AAT site is closing for all of August though so we are going to have to wait until September to re-take. Wish it had been an earlier exam rather than my last.

    Thank you for your help. I hope I can go on and a bit like you with the help you give to people.

    Kelly xxx

    Where did you hear about the site closing for that long??
  • Nps
    Nps Experienced Mentor Registered Posts: 782
    Yes, the £45,000 will be the remainder of the purchases which are yet to be paid (the outstanding liability, whereas the £300,000 is the expense for the year, so yes, the 45,000 is part of the 300,000.
  • Kelly7
    Kelly7 Well-Known Registered Posts: 218
    Ahh I get it. Thank you mos. Topcat - my college had scheduled re take dates over the summer but have had to cancel them. It was my teacher who told us x
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