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Finance Exercise


Submitted By lorebarona
Words 1155
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Revenues 420 This is the value of goods sold, i.e. all 350 bottles that you have sold even though some have not yet been paid for. The amount still to be

paid – the Debtor of £60 – is included in the Balance Sheet. (Transaction 4)


Cost of Goods Sold (175) This is the cost to you of the 350 bottles that you have sold during

Monday. You bought them for £0.50 each. This is not the cost of all of the 500 bottles that you bought. The remaining 150 bottles that remain unsold at the end of Monday are included in the Balance Sheet as Inventory (£75) as you expect to sell them on Tuesday. Note that you still have to pay for 100 bottles and this Creditor of £50 is also included in the Balance Sheet. (Transactions 4 and 2)

Gross Profit 245 The Gross Profit equals Sales minus Cost of Goods Sold
Less Operating Expenses Ice (15) The cost incurred during the day (and paid in cash) (Transaction 5) Food (10) The cost incurred during the day (and paid in cash) (Transaction 5) Wages (75) The cost incurred during the day (and paid in cash) (Transaction 6)

Depreciation (20) The depreciation charge represents Monday’s share of the wearing out of the Fixed Asset (cool cabinet) that you have purchased. The expected total loss of value in the Fixed Asset is £150 - £50 = £100. We assume an equal depreciation charge of £20 per day for each of the 5 days Monday – Friday. This

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