Page 146 - Book-keeping for Secondary Schools Student’s Book Form One

Book-Keeping for Secondary Schools

Example 7.3

Presence of inventory at the beginning of the period

Suppose in the example 7.2, Agatha also had an inventory worth TZS 3,246,000 in the
store at the beginning of the year. If there is an inventory at the beginning, it means
that the cost of goods sold also include the cost of goods that were in the store at the
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beginning of the period. Calculation of the cost of goods sold will therefore include the
figure of opening inventory.

In the case of Agatha, the cost of goods sold would be calculated as follows:

Cost of goods sold = (Opening inventory + Net purchases) – closing inventory

= TZS (3,246,000 + 29,885,000 – 4,683,000)

= TZS 28,448,000

It follows that Gross profit = TZS (54,620,000 – 28,448,000)

= TZS 26,172,000

It should therefore be possible to use the following income statement format, and
calculate the cost of goods sold and gross profit in different situations.

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Student’s Book Form One

Book Keeping Form 1 New 2024 FINAL.indd 138 18/10/2024 10:14