Double-entry query

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:28AM in AAT student discussion
Hi. Posted this earlier on another category, but think I got the wrong one. I'd appreciate any help people can provide.

My employer gives potential employees some 'basic' double-entry to do when they come for interviews, I had a look at it and I wasn't 100% sure myself.

Question was, how to account for a purchase of stock on credit for £1000 plus VAT £175. Then how to account for the sale of some of that purchase (£600-worth of stock).

Just the purchases/stock part. How does that all get journalled? Is it dr stock £1000, dr VAT £175 and cr PLCA £1175 at time of purchase, then when part of the stock is sold, cr stock 600 and dr purchases 600 (as well as journals to SLCA/Sales/VAT)?

Thanks

Marcus

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Double-entry query
    marcusandingrid wrote:
    Hi. Posted this earlier on another category, but think I got the wrong one. I'd appreciate any help people can provide.

    My employer gives potential employees some 'basic' double-entry to do when they come for interviews, I had a look at it and I wasn't 100% sure myself.

    Question was, how to account for a purchase of stock on credit for £1000 plus VAT £175. Then how to account for the sale of some of that purchase (£600-worth of stock).

    Just the purchases/stock part. How does that all get journalled? Is it dr stock £1000, dr VAT £175 and cr PLCA £1175 at time of purchase, then when part of the stock is sold, cr stock 600 and dr purchases 600 (as well as journals to SLCA/Sales/VAT)?

    Thanks

    Marcus

    removed post by author
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Double-entry query

    Thanks for the reply. If purchases is not touched in the first place or in the second journal, where would you derive the Cost of Sales figure for the P&L?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Double-entry query

    removed post by author
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Double-entry query

    Yeah, that's what I thought too. So, if there was no entry into the purchases ledger, where would you get your CoS from?

    I'm not saying what you suggested previously was wrong, I'm just trying to get my head around it, if it is correct.

    Sorry to take you back so many years!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Double-entry query

    http://www.aat.org.uk/forums/posts/list/10174.page
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Double-entry query

    I have to disagree with all because you don’t debit/credit stock whenever a transaction takes place. Stock is automatically adjusted when you do your periodic or annual stock take to calculate your profit figure.

    Also, let us say that the “£600-worth of stock” is sold for £720 exclusive of VAT to cover your profit margin.

    Standard rate VAT applies in all cases. All sales and purchases are on credit.

    The journal entries would be:

    Purchases DR 1,000
    VAT Control A/C DR 175
    Creditors CR 1,175


    Debtors DR 846
    Sales CR 720
    Vat Control A/C CR 126

    This is all you need.

    End of the year you clear the Purchases and Sales account by transferring to P&L. The VAT Control A/C should clear out when you pay or receive a cheque from the Customs & Excise.

    Physical Stock is never part of double entry. You will always see opening stock in TB but not closing stock. Closing stock is given as notes and this proves that stock can never be part of double entry book-keeping.

    I am not sure why TLG said "and debit SLCA/Sales/VAT" unless he was drinking from my bottle!! One always credit a Sales Account and VAT but debit SLCA/Debtors)!

    Hope this proves useful.

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Double-entry query

    xfspgr are you talking about my post? it is definitely right.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Double-entry query

    I think xfsgpr is having a dig at my post. I did say that I haven't done it for some time. I possibly have got it wrong - I don't have my AAT or CIMA manuals to hand to do text book answers. I concurr that sales are always credits.

    Sometimes, I really do wish xfsgpr could be a little gentler with his replies and not so critical of others attempts to help.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Double-entry query


    TLG,

    Why would I have a dig at your post? Would I do anything like that? Am I so horrible person that you too have started to dislike me?

    I am quite gentler in my replies most of the time unless somebody challenges me without facts. I alsways provide links to external sites as my source (wherever possible) but some people would just waffle and "patronize" my messages.

    So you are quite sure then that you haven't been sharing my bottle?

    Best regards,

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Double-entry query


    Linc,

    I have posted my reply under that link you gave. I hope this satisfies you. I didn't deliberately intend to miss you completely. It is just incovenient to switch links when posting under one. I am sure you understand this.

    I hope you didn't feel left out.

    Best regards,


  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Double-entry query

    XFSJRP,

    I know we have had our differences over the last few days - but please please please try to be a little more courteous when you reply to threads that you do not agree with. There is no need for rudeness. We are not competing with eachother.

    TLG was mainly helping out with a query - this is what the forums are for.

    Once again, a little diplomacy would ensure that you also don't get offended in your replies.

    Steve

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