N
Nicole890
Member
Hi guys,
I'm getting very confused here. I'm looking at question 19 in October 2010 (q8 in revision booklet 4). I'd be incredibly grateful if someone could help me out
The question involves "updating financial statements". I think I understand some the income statement (finance costs is 3months worth of interest at 8% = 80, but why have they not included the 1000 spent on raw materials in cost of sales? I see this has gone into inventories on the balance sheet (which makes sense) but I thought cost of sales was inventory at start + purchases (surely these are the raw materials) - closing stock - depreciation for year. The only change they have made is to alter for depreciation??
Some of the balance sheet also makes no sense to me:
Why has this interest payment of 80 gone into current liabilities? I thought interest payments never went into a balance sheet? And why a liability? since we have deducted it from profit in the income statement?
Really sorry about the length...
I'm getting very confused here. I'm looking at question 19 in October 2010 (q8 in revision booklet 4). I'd be incredibly grateful if someone could help me out
The question involves "updating financial statements". I think I understand some the income statement (finance costs is 3months worth of interest at 8% = 80, but why have they not included the 1000 spent on raw materials in cost of sales? I see this has gone into inventories on the balance sheet (which makes sense) but I thought cost of sales was inventory at start + purchases (surely these are the raw materials) - closing stock - depreciation for year. The only change they have made is to alter for depreciation??
Some of the balance sheet also makes no sense to me:
Why has this interest payment of 80 gone into current liabilities? I thought interest payments never went into a balance sheet? And why a liability? since we have deducted it from profit in the income statement?
Really sorry about the length...