Hi
Of you look at cos sales method
Revenue 500
Less purchasez 100
Less opening stock 100
Plus closing stock 100
And this way gross profit will be 400.
But via trading account method
Revenue 500
Plus Ending stock 100
Total balance 600
Minus purchases 100
Minus opening stock 100
Gives balance c/d 400
My question is can you work out a problem in cos method if they ask you to prepare a trading account?
I know why no one wants to answer it.
1. Gross and profit margins are wrong through this metgod.
2. Other profitability ratios are ruined because they in cogs method are not in coherence with cos method.
3. Yet they want international investment onto trading account financial statements?
Metamorphosis is a chance and a daily chance!!
Chirag P Shah & Co. Chartered Accountant
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