Page 70 - Accountancy_F5

Solution 2.11
There are two alternatives to determine the value of closing inventory

Alternative 1
Workings
1. The value of gross profit
FOR ONLINE READING ONLY
Gross profit ratio = 25%. This is based on sales. This is therefore margin

Gross profit
M argin= # 100
LANGUAGE EDITING
Net sales
LANGUAGE EDITING
Net sales = Gross sales – Returns inwards = TZS 5,120,000 – 45,600 = TZS 5,074,400

Gross profit
25 = # 100
,
, 5 074 400

25 Gross profit
100 = , 5 074 400
,

25
,
100 # , 5 074 400 = Gross profit

Gross profit = TZS 1,268,600

Then, simply draw a statement of profit or loss and then find the missing figures as follows:

Income statement for the year ending 31 December 2023
st
Details TZS TZS
Sales 5,120,000
Less: Return inwards 45,600
Net sales 5,074,400
Less: Cost of sales:
Opening inventory 393,600

Add: Purchases 4,096,000
4,489,600
51,200
Less: Return outwards
Cost of goods available for sale 4,438,400
Less: Closing inventory (?) (A) (B)
Gross profit 1,268,600

Student’s Book Form Five
57

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