DFS Section 2

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lorraine1066
lorraine1066 Registered Posts: 3 New contributor 🐸
in AAT Level 4 (Level 8 in Scotland)
Is anyone else panicking? Section 1 was good, all balanced but final ratio in section 2 threw me. Am using osborne books and nowhere does it say you can use cost of sales instead of purchases in the equation! Just waffled on to cover up not doing the calculation.

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  • ma1thew
    ma1thew Registered Posts: 22 New contributor 🐸
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    i worke out purchases for the 2008 variance but used cos for 2007 was this correct?
  • lorraine1066
    lorraine1066 Registered Posts: 3 New contributor 🐸
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    dfs

    Not sure but at least you did a calculation of some sort!
  • ma1thew
    ma1thew Registered Posts: 22 New contributor 🐸
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    you won't lose too many marks as you said you did write something! not enough to fail the section!
  • Moseley_21
    Moseley_21 Registered Posts: 59 Regular contributor ⭐
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    Yeh i just did them both on cost of sales! wrote it down as purchases then realised i had no value! Thought i would use COS because at least the figures would be comparable???
  • acky2106
    acky2106 Registered Posts: 52 Regular contributor ⭐
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    Moseley, that should be fine. I wrote that the formula was payables/purchasesx365 however, upon realising there was no purchasing figure i used cost of sales and wrote a note underneith to say it was calculated on cost of sales
  • Sparkz1988
    Sparkz1988 Registered Posts: 16 New contributor 🐸
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    trade receivable turnover per day =
    trade receivables/turnover X 365 days

    trade payables turnover per day =
    trade payables/turnover X 365 days


    is that right??
  • Richard
    Richard Registered Posts: 373 Dedicated contributor 🦉
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    acky2106 wrote: »
    Moseley, that should be fine. I wrote that the formula was payables/purchasesx365 however, upon realising there was no purchasing figure i used cost of sales and wrote a note underneith to say it was calculated on cost of sales

    Thats exactly what I did.

    I guess the only other thing we could have done is work out the purchase figure for ourselves as we were given cost of sales, the closing inventory for the year was on the balance sheet, and the closing inventory for the previous year would have been the opening stock!
  • jeskimosdad
    jeskimosdad Registered Posts: 11 New contributor 🐸
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    We were taught to use cost of sales if credit purchases could not be identified. Purchases for 2008 could be calculated but for 2007 there was no opening stock figure so this could not be derived. When comparing 2 sets of ratios for different years, they are only meaningful if you take the figures in the calculations from the same source. Therefore, I reckon using cost of sales for both calcs was bob on the money.:001_unsure:
  • MrGofOxford
    MrGofOxford Registered Posts: 22 New contributor 🐸
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    Richard wrote: »
    Thats exactly what I did.

    I guess the only other thing we could have done is work out the purchase figure for ourselves as we were given cost of sales, the closing inventory for the year was on the balance sheet, and the closing inventory for the previous year would have been the opening stock!

    Richard is bang on the money, I used costs of sales & as soon as I handed my paper in I realised that we could figure it out:

    2007 closing stock: (given)
    less 2008 closing stock:(given)
    add Purchases (bal figure)

    = cost of sales (given)
  • Richard
    Richard Registered Posts: 373 Dedicated contributor 🦉
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    MrGofOxford wrote: »
    Richard is bang on the money, I used costs of sales & as soon as I handed my paper in I realised that we could figure it out:

    2007 closing stock: (given)
    less 2008 closing stock:(given)
    add Purchases (bal figure)

    = cost of sales (given)

    Someone has since pointed out to me that we wouldnt have been able to do the same for the previous year, and as you would need to use the same formula for consistency, it was best to use cost of sales. So it looks like we have done OK by using cost of sales!!
  • Moseley_21
    Moseley_21 Registered Posts: 59 Regular contributor ⭐
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    Happy Days!!

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