Closing Stock

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Can someone please help me with the following question. I know what the answer is but im struggling to understand why and how.<BR><BR>Alex Williams has given you a closing stock figure of 24,000 at selling price. There is also a note in last years file stating that the sales margin is normally one third. <BR><BR>Use this information to calculate the closing stock figure for inclusion in the final accounts.<BR><BR>Thanks<BR>Kate

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Closing Stock

    Well I used the long method of taking opening stock and finding closing stock but what the AAT have done is basically divide 24,000 by 3.<BR><BR>24000 divide by 3 = 8000<BR><BR>8000 is the margin of 1/3<BR><BR>16,000 is therefore the closing stock<BR><BR>Once I realised I thought frightingly simple!!!!!!!!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Closing Stock

    I had this on a recent past paper - it also threw me!!!<BR><BR>I did the 24000 / 3 = 16000<BR><BR>but then i went on to adding opening stock and purchases etc....<BR><BR>When I asked my tutor about it - he said....<BR><BR>£24000 is the what is left to sell at selling price (sales on the TB was alot higher) therefore if we sold everything that was left it would sell at 24000.<BR>Margin is 1/3 therefore (even doing it the long way around!)<BR>24000 / 3 = 8000 gross profit on the sales<BR>so 24000 - 8000 = 16000 which is cost of sales on the 24000 so 16000 is the closing stock figure as stock but be valued at lower cost or realisable value.<BR><BR>I think we all (well i did) looked into it far more than we needed to do. I was trying to find the Cost of sales for the year not on what was just left.<BR><BR>Good luck on Wednesday - I will be sat there too, AAAAHHHH<BR><BR>Amanda
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Closing Stock

    At first I just got the answer to be 8000 and couldnt work out why it was doubled to make 16000. I think that explains it though.<BR><BR>Many thanks to you both.<BR>Good luck for your exams also, im really nervous now and hope I get through it ok
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Closing Stock

    Hi there<BR><BR>All this mark up and margin stuff confuses me too, although someone did show me a method in which you can work it out extremely easily.<BR><BR>We know that the Margin is always based on the sales being 100%, therefore<BR><BR>Sales 100%<BR>Gross Profit 33.333333333%<BR>Cost of Sales 66.666666666%<BR><BR>If you have the sales figure which you do - 24000 you can work out the cost of sales from this, which is always the figure you use according to SSAP9 - Stock should be valued and lower of cost or Net reliasable value.<BR><BR>The formula that i have to working any question out like this is - Take the figure you have x by what you want / what you have - so in this case<BR><BR>24000 x 66.6a% (the figure we want) / 100% (what we have) = 16000 <BR><BR>We can then work out the Gross Profit because we know COS + GP = Sales, so 24000 - 16000 = 8000 Gross Profit<BR><BR>Alternitavly you could say that the GP was what you wanted and work that out, as follows -<BR><BR>24000 x 33.3a% (the figure we want) / 100% = 8000<BR><BR>This works exactly the same for when there is a Mark Up too.<BR><BR>This may seem a bit confusing at first but once you memorise it, it's very helpful. I'm sitting you FRA next Wednesday and am extremely worried about it. :-(<BR><BR>Hope this information helps.<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Closing Stock

    Premier training teach mark-up and margin by the means of a table.<BR><BR>Once its understood - it becomes really easy to work out the various information you had.. for example work out the Gross Profit from a Cost of Sales figure and Margin which I found difficult as I was at first lost by the fact margin is based on the Sales figure - therefore I was straight away lost by the fact I didnt have the sales figure!!<BR>Did that make sense of loose you more??<BR><BR>With the table the gross profit is always in the middle - therefore you know you need to either add or take away to get the other figure needed. So when you go the 8000 you had worked it out correctly just used the Gross Profit figure instead of taking it away from the sales.<BR><BR>I think I have the help sheet if you want a copy.<BR><BR>Amanda
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Closing Stock

    Amanda <BR><BR>If you have the help sheet that would be great, im studying with Premier Training but Im having problems logging onto their website to get into the VIP area as I thought there may be some help notes. I will keep trying <BR><BR>Thanks<BR>Kate
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Closing Stock

    have u tried the excel sheet that helps teach markup and margin?<BR>u have to type in your answers in the yellow shaded boxes etc etc?<BR>if anyone wants a copy of that, just leave me your email addy!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Closing Stock

    Can I have a copy please.<BR><BR>My email is: Kate.seedhouse@wbs.ac.uk<BR>Thanks<BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Closing Stock

    Hi Shaz,<BR><BR>Could you please e-mail the mark-up/margin spreadsheet to me?<BR><BR>dawn_keeble@hotmail.com<BR><BR>Thanks<BR>Dawn
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Closing Stock

    emailed to you both Katy and Dawn, hope it helps
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Closing Stock

    Hi Shaz<BR><BR>Any chance I could have a copy of the spreadsheet please? It is the only thing I am having difficulties with! My address is stephen_oz2001@yahoo.co.uk. <BR><BR>Thanks
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Closing Stock

    Hi<BR><BR>Please could you send me the excell spreadsheet too....thanks!!<BR><BR>my email is ngymanne42@f2s.com<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Closing Stock

    Sorry spelt my email wrong!! Really loosing it now!!<BR><BR>its gymanne42@f2s.com<BR><BR>ta

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