Accounting for trading business

List 4 principles for managing inventory

Inventory rotation
Monitoring of seasonal products

Inventory turnover formula

Average inventory/cost of sales x 365

Net vs gross profit

Net: Sales revenue less all expenses incurred by a business.

grosss: Sales revenue for a period less the cost of sales over that period

What does a service business not have? Why doesnt it have it?

Gross profit.

Cost of goods sold vs cost of sales?

Cost of goods sold includes cost of sales and cartage inwards.

Cartage definition?

The cost of transporting inventory to or from a business

Net sales definition?

Total sales for a period less sales returns

FORMULAS

Net sales = total sales - sales returns
Gross profit = net sales - cost of sales
Adjusted gross profit = gross profit - inventory loss
Net profit = Adjusted gross profit - other expenses

cartage inwards

Delivery fee is created when inventory is coming into the business
(IMPORTANT) a part of the cost of goods sold

Cartage outwards

Expenses occured when inventory leaves the business
and is being delivered to customers
(IMPORTANT) Recorded as other expense

Things that are not in income statement

Loan
GST
Drawings
Non current assets
capital

Gross profit vs adjusted gross profit

Adjusted gross profit is calculated AFTER inventory cost is taken away

Seven headings in an income statement

Revenue
COGS
gross profit
Inventory gain/loss
adjusted gross profit
Expenses
Net profit

ROI formula

3 ways of evaluating inventory turnover

FOWARD/SIDEWAYS/BACKWARDS
Industry average
Budgeted rate
Previous periods

cost of goods sold definition

ALL expenses incurred in getting goods into the business ready for sale.

cost of sales definition

The cost price of inventory sold by a trading firm

Where would refrigerating business expenses be categorised?

In other expenses

Does cartage in or cartage out go into the cost of goods sold

cartage inwards.