[Importer]

A market trader (registered as a sole trader) imports t-shirts from Asia. Each t-shirt costs £3 to buy and 50p to ship. He sells the t-shirts for £10 each and pays £100 a week for his stall at the market. In the course of the financial year, he imports 5,000 t-shirts and sells 3,000. At the end of the financial year, he draws up a profit and loss account. Which profit and loss account is correct, (A) or (B)? What does HM Revenue & Customs have to say about this?

(A)
SALES: £30,000
COST OF GOODS SOLD: £9,000
GROSS PROFIT: £21,000
RENT: £5,200
SHIPPING COSTS: £2,500
NET PROFIT: £13,300

(B)
SALES: £30,000
COSTS OF GOODS SOLD: £10,500
GROSS PROFIT: £19,500
RENT: £5,200
NET PROFIT: £14,300

[IP2]

Homework problems?

Prefer people to say hello etc first!

[Mike]

Originally Posted by IP2

Homework problems?

Prefer people to say hello etc first!

lol my thoughts exactly!

[IP2]

And you might want to point out to your teacher that technically neither of those answers are correct!!

[Peter W]

Assuming the net realisable value is greater than the cost at the end of the year, it is B.

Shipping costs should be added to the cost of stock, which then either gets written off through the profit and loss account, or carried forward on the balance sheet to the next year.

http://www.hmrc.gov.uk/manuals/bimmanual/BIM33135.htm
"In general, the term ‘cost' should be interpreted as meaning the total historical cost of bringing the relevant stock to its existing condition and location"

[IP2]

Well done Pete ... Another kid who will pass a test by having no understanding of basic Maths! So why is B also not correct mate?

[Peter W]

Is it a trick question?

[HuggyBear]

Is the OP even bothered? Doesnt seem to be interested in his/her post...

No introduction soon = me vote for a ban

[DavidT]

Whatever happened to Study Groups? Or simply learning from the text book?

[HuggyBear]

Originally Posted by DavidT

Whatever happened to Study Groups? Or simply learning from the text book?

Global Warming