Hello, Apologies...me again! I've gone back to financial statement questions in booklet 3 and there are two questions with conflicting answers as to where to put the depreciation of vehicles. I personally would put it under distribution costs (as that's where running costs go). Question 3 in the booklet - April 2006, q20 - puts it into cost of sales, even though the question specifies all vehicles are used by delivery and sales staff. On the other hand, question 9 - April 2013, q19 - puts it under distribution costs? Is one of these a typo or is it flexible where it can go? Thanks
Hi - it's quite flexible. The examiners are generally happy to have one item for depreciation in the cost of sales (regardless of the nature of items being depreciated). A technically better approach from an accounting point of view is to put separate depreciation lines in the cost of sales/overhead expenses depending on the nature of the thing being depreciated. Either approach in the exam should be fine and the resulting NPBTI is the same either way.
Hi both, The different treatment will affect the Gross Profit. Just wondering will there be a question that requires the gross profit (e.g. a ratio calculation question following the income statement which using the value of gross profit)? Thanks! Eugene
