Incomplete records  find cost of sales
lala99
Posts: 15Registered
Hi
Does anyone know if it's possible to find the cost of sales figure and the sales figure if all you have is purchases and an indication that the inventory has gone down by a given amount during the year????
Help!
Thanks in advance
Does anyone know if it's possible to find the cost of sales figure and the sales figure if all you have is purchases and an indication that the inventory has gone down by a given amount during the year????
Help!
Thanks in advance
Best Answers

Zoynal98 Posts: 65No problem
If there was a reduction to Inventories you will add this to the Purchases figure and if there's an increase to Inventories you will subtract this from the Purchases figure, this will give you the cost of sales figure.
Answers
So you have the movement (Opening  closing) + Purchases = Cost of sales
Does it give you any additional info about the sales figure?
Info given was:
Purchase price including vat
Mark up percentage
'Inventory reduced by x amount over the year' , no opening inventory figure provided
Need to find:
1  cost of sales
2  Net sales
Thanks
Not sure if I should give them as relates to recent exam...
Make a figure up for Opening and Closing Inventories which will give you a reduction of £200.
(500 + 3000)  300 = £3,200 This is your cost of sales.
If you have this and the Cost of Sales, you should be able to find out Net Sales.
For example: Mark up is 25%
Cost of Sales is £3,200
3,200 = 100%
3,200 / 100 = £32
32 x 125 (100% + 25%) = £4,000 This is Net Sales
Hope this helps.
As you only had the movement it will look different but have same outcome:
£3,000 + £200 = £3,200
For markup, say you want 25% markup:
£3,000 x 1.25 = £3,750
So, in the exam, if this is all the info I am given, am I just supposed to make the other figures up???? I'm confused!
Basically, if there was a reduction to Inventories you will add this to the Purchases figure and if there's an increase to Inventories you will subtract this from the Purchases figure, this will give you the cost of sales figure. Once you have the cost of sales figure you can then work out net sales using the Markup percentage given to you.
and realised I made error in my calculations above for markup it's:
3,200 x 1.25 = £4,000
Ok so say purchases is 58380
Mark up is 20%
Inventory a has gone down by 1185 over the year
I need to find cos and net sales...
Please can you just explain that again?
Cost of Sales = (Opening Inventory + Purchases)  Closing Inventory
[Reduction in inventory, add to purchases]
£58,380 + £1,185 = £59,565
£59,565 is the Cost of Sales
Now work out the Net Sales using the Mark up which is 20%:
£59,565 = 100%
59565 / 100 = 595.65
595.65 x 120 (100% + 20%) = £71,478
£71,478 is the Net Sales
I'm totally with you on calculating from cos to sales... No problems there. .
It's just the first bit, just knowing that inventory has reduced over the year, but not knowing what it started at or finished at... ???? How does that give me my cos? I thought it was opening inventory+ purchases, less closing inventory= cos.
Thank u
As @AC88 stated:
So you have the movement (Opening  closing) + Purchases = Cost of sales
It's the same formula as [(Opening Inventory + Purchases)  Closing Inventory] but it has been rearranged to fit your question. (Opening Inventory  Closing Inventory) is the Movement in Inventories
For example:
Opening Inventory: £3,000
Purchases: £60,000
Closing Inventory: £2,000
The cost of sales is £61,000
However if you didn't have the Opening or Closing inventory and they just gave you the movement which in this case is a £1,000 reduction because at the beginning of the year the Inventory was £3,000 (Opening) and at the end of the year the Inventory was £2,000 (Closing). Because there was a reduction you will need to add the £1,000 to the purchases. This can be the other way round where the Opening inventory is less than the Closing Inventory thus giving us an increase in the movement of inventories.
Hope this make sense.
Thank you so much.
And here is the scary thing, in all my number crunching I actually hit on the right answer and didn't know it!
So really the opening and closing inventory figures are irrelevant in a way, as the were not provided, it's just the result of that calculation that matters. Which I then add to purchases, (or deduct if it's been an increase in inventory over the year??) which then gives me cos and therefore allows me to calculate net sales and gross profit!!!! Got it