Let us assume that we have a system of ledger accounts which on June 30, the year end, includes opening stock ($150,000) and purchases ($900,000). The value of closing stock has been determined as $200,000, but this has not yet been recorded. We need to transfer the two current balances to a cost

Question

Let us assume that we have a system of ledger accounts which on June 30, the year end, includes opening stock ($150,000) and purchases ($900,000). The value of closing stock has been determined as $200,000, but this has not yet been recorded. We need to transfer the two current balances to a cost of sales (CoS) account, then incorporate the closing stock adjustment, and then transfer the cost of sales to the profit and loss account. Journal entries needed to reflect this are as follows:

Date	Account name and narrative reference	Folio	Debit side	Credit side
June 30	Cost of sales		150,000
	Opening stock			150,000
	Transfer of opening stock to Cost of sales
June 30	Cost of sales		900,000
	Purchases			900,000
	Transfer of purchases to Cost of sales
June 30	Inventory (closing)		200,000
	Cost of sales			200,000
	Adjustment of closing stock through Cost of sales
June 30	Profit and loss—Cost of sales		850,000
	Cost of sales			850,000
	Transfer of Cost of sales to Profit and loss account

Accepted Answer

The ledger accounts would appear as follows:

Date	Account name and narrative reference	Folio	Debit side	Credit side
June 30	Cost of sales		150,000
	Opening stock			150,000
	Transfer of opening stock to Cost of sales
June 30	Cost of sales		900,000
	Purchases			900,000
	Transfer of purchases to Cost of sales
June 30	Inventory (closing)		200,000
	Cost of sales			200,000
	Adjustment of closing stock through Cost of sales
June 30	Profit and loss—Cost of sales		850,000
	Cost of sales			850,000
	Transfer of Cost of sales to Profit and loss account

Purchases
June 30	Balance b/f	900,000	June 30	Cost of sales	900,000

Inventory (closing)
June 30	Cost of sales	200,000

Cost of sales
June 30	Opening inventory	150,000	June 30	Closing inventory	200,000
June 30	Purchases	900,000	June 30	Profit and loss (CoS)	850,000
		1,050,000			1,050,000

Profit and loss
June 30	Cost of sales	850,000

Question 4.11: Let us assume that we have a system of ledger accounts which...

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