Hello. This video has been helpful. I just have a couple of questions: 1. Why do you say that opening inventory is an expense? 2. How do the adjustments come in? Would they be part of the question? Thanks.
Hi, glad it’s been helpful! To answer your questions: 1) as the inventory would have been used throughout the year it would be an expense to the business. It’s technically classed as a cost of sale strictly speaking but for now within the ETB treat it as an expense to the business. Further clarification on this will come in within your next unit when you see how it fits in to a profit or loss. 2) the year end adjustments would tend to come at the end of the ETB. These would need to be entered in before the profit (or loss) was calculated. These would be listed within the question. Usually under “additional information”. Hope this helps!
Thank you! :D Please can I ask why the top closing inventory figure is a CR adjustment then DR on SOFP, and the bottom one a DR adjustment then CR SOPL? Or doesn't it matter as it balances out?
No problem at all, the closing inventory is a credit within the profit or loss because it’s a deduction as part of your cost of sales calculation. The point being if it’s still in your inventory then it hasn’t been sold and therefore not a cost of sale. It’s then shown as a debit in the statement of financial position to represent the asset value.
I believe what you may have done here is calculated the debits before adding in the profit to balance off the two columns. You then need to enter in the profit as a debit to the P&L and credit to the SOFP.
Hi, it’s an example adjustment. It could relate to a posting error made within the accounts. These particular adjustments will be provided to you within the exam, it won’t provide an explanation as to what they’re for you’ll just be required to make them as you transfer the balances over to either the P&L or SOFP.
Thank you so much! Very clear and great explanation 👍
Thank you!! Short video, perfectly explained, 👌💯
Do you have video regarding trial balance adjustments?
Great video, explained very well.
These videos are great. Will you also be doing any videos on the other units like final accounts preparation and the management accounting unit?
Thank you very much! I would definitely like to at some point, it just depends on time!
Cheers Will!
You’re very welcome!
Great video, very helpful!!
Hello. This video has been helpful.
I just have a couple of questions:
1. Why do you say that opening inventory is an expense?
2. How do the adjustments come in? Would they be part of the question?
Thanks.
Hi, glad it’s been helpful!
To answer your questions:
1) as the inventory would have been used throughout the year it would be an expense to the business. It’s technically classed as a cost of sale strictly speaking but for now within the ETB treat it as an expense to the business. Further clarification on this will come in within your next unit when you see how it fits in to a profit or loss.
2) the year end adjustments would tend to come at the end of the ETB. These would need to be entered in before the profit (or loss) was calculated. These would be listed within the question. Usually under “additional information”.
Hope this helps!
Thank you! :D
Please can I ask why the top closing inventory figure is a CR adjustment then DR on SOFP, and the bottom one a DR adjustment then CR SOPL? Or doesn't it matter as it balances out?
No problem at all, the closing inventory is a credit within the profit or loss because it’s a deduction as part of your cost of sales calculation. The point being if it’s still in your inventory then it hasn’t been sold and therefore not a cost of sale. It’s then shown as a debit in the statement of financial position to represent the asset value.
Thank for your help, but I don't understand why I got 349,901 in the debit of the PL...
I believe what you may have done here is calculated the debits before adding in the profit to balance off the two columns. You then need to enter in the profit as a debit to the P&L and credit to the SOFP.
Question what is the 2800 adjustment in sale revenue about?
Hi, it’s an example adjustment. It could relate to a posting error made within the accounts. These particular adjustments will be provided to you within the exam, it won’t provide an explanation as to what they’re for you’ll just be required to make them as you transfer the balances over to either the P&L or SOFP.