Advanced Financial Accounting FIN611 Mian Ahmad Farhan Lecture5

Advanced Financial Accounting FIN-611 Mian Ahmad Farhan Lecture-5 Single Entry & Accounting for Non. Profit organizations

Cost Structure Markup Margin % of gross profit on cost of goods sold % of gross profit on sales

Markup Sales xxx Less Cost xxx Gross profit xxx 125% 100% 25%

Margin Sales xxx Less Cost xxx Gross profit xxx 100% 75% 25%

Debtor’s Account Opening balance Credit sales xxx xxx Cash received from debtors Closing balance ? ? xxx

Question Cash Book Receipt Amount Payment Cash sales 500 Amount

Question Debtors Account Opening balance Credit sales 300 ? Cash received from debtors Closing balance Cost of goods sold is Rs. 2, 000 Gross Profit is 20% of cost of goods sold 1, 200 ?

Solution Cost of goods sold (COGS) = Rs. 2, 000 Gross profit (GP) = 2, 000 x 20% = 400 Sales = COGS + GP = 2, 000 + 400 = 2, 400 Sales = Cash sales + Credit sales = Sales – Cash sales = 2, 400 – 500 = 1, 900

Solution Opening balance Credit sales 300 1, 900 2, 200 Cash received from debtors Closing balance 1, 200 1, 000 2, 200

Question Cost of goods sold is Rs. 2, 250 Gross Profit is 25% of sales Find Sales and Gross profit. Solution Sales Less COGS Gross profit ? 2, 250 ? 100% 75% 25%

Formula Given information in absolute terms x % of required information % of given information Sales = 2, 250 / 75 x 100 = 3, 000 Gross profit = 3, 000 x 25% = 750

Question Sales is Rs. 4, 000 Gross Profit is 25% of cost Find Cost and Gross profit

Formula Given information in absolute terms x % of required information % of given information Gross profit = 4, 000 / 125 x 25 = 800 GP = Sales - COGS = Sales – GP = 4, 000 – 800 = 3, 200

Question Creditor’s Account Cash paid to creditors Closing balance ? 800 Opening balance Credit Purchase 500 ?

Question COGS = 3, 200 Opening Stock = 400 Closing stock = 800 Cash Purchases = 1, 600 Find the value of Credit purchases and Cash paid to creditors. Solution COGS = Opening stock + Purchases – Closing stock Purchases = COGS + Closing stock –opening stock = 3, 200 +800 -400 = 3, 600 Purchases = Cash purchase + Credit purchase = Purchases – Cash purchase = 3, 600 -1, 600 = 2, 000

Solution Creditor’s Account Cash paid to creditors (Balancing figure) Closing balance 1, 700 Opening balance Credit Purchase 500 2, 000 800 2, 500

COGS = Opening stock + Purchases – Closing stock Purchases = COGS + Closing stock – Opening stock = COGS - Purchases + Closing stock = COGS - Purchases - Opening stock

Accounting for Non Profit organizations

Resources = Sources Assets = Accumulated fund + Liabilities

Division of Non-profit organizations Small scale organizations Medium scale organizations Large scale organizations Receipt & Payment A/c Cash book Statement of affairs Year end adjustments