Financial Statements Profit and Loss

In my exam i had this question which I struggled to solve.
When you prepare the statement of profit and loss, in the calulation of cost of sales (opening inventory + purchases - inventory) I had a note came up which was not included with the closing inventory saying that "there is a worth of inventory (e.g £100). this inventory will make £50 profit (for example). this is not included in closing inventory" How do you include/deduct the note with the closing inventory calculation?
please help!
Thanks in advance


  • CeeJaySixCeeJaySix Well-Known Registered Posts: 645
    Inventory is valued at the lower of cost and net realisable value. As the inventory will make a profit in your example, cost must be the lower. I assume the 'worth' of inventory you mention is the sale price; cost will be the sale price less the profit on that sale ie. £100 - £50 = £50. Therefore increase your inventory by £50 (which will decrease your cost of sales).
  • paripari Registered Posts: 5
    Thanks for the help CeeJaySix
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