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Inventory Valuation - Page 4.23 Q.4
Accountancy
4. Physical verification of stock in a business was done on 23rd June, 2020. The value of the stock was ` 48,00,000. The following transactions took place between 23rd June to 30th June, 2020: i) Out of the goods sent on consignment, goods at cost worth ` 2,40,000 were unsold ii) Purchases of ` 4,00,000 were made out of which goods worth ` 1,60,000 were delivered on 5th July, 2020. iii) Sales were ` 13,60,000, which include goods worth ` 3,20,000 sent on approval. Half of these goods were returned before 30th June, 2020. iv) Goods are sold at cost plus 25%. However, goods costing ` 2,40,000 had been sold for ` 1,20,000 Determine the value of stock on 30th June, 2020. Answer key has assumed that other half of goods sent on Sale or Return has been sold. The cost of goods returned has been added back. My question is, why is the cost of goods returned being added back? These transactions occured between june 23 and june 30, thus the goods sent were a part of stock on june 23rd. Agreed, cost of sold goods will be reduced, but why is the cost of goods sent, and subsequently returned, being added back?
Answers (8)
CA Suraj Lakhotia Admin
50% goods returned so these do not form part of sales. Balance 50% is included in sales however they are still not sold. Hence added to inventory separately.
But why is the cost of goods returned being added back? These transactions occured between june 23 and june 30, thus the goods sent were a part of stock on june 23rd
Thread Starter
Vishnu MuraleedharanBut why is the cost of goods returned being added back? These transactions occured between june 23 and june 30, thus the goods sent were a part of stock on june 23rd
Good returned are not added back. Goods with the customer is added back.
CA Suraj Lakhotia Admin
Good returned are not added back. Goods with the customer is added back.
So we reduce the cost of those goods sent, for which approval has not been sent, and then we add it back separately?
Noor Mahajan
How are we supposed to know that we have to less the sale by 20%?or 80%
Are you talking about case iv) ? There, sale price is 25% over cost. This means that if cost is 100, selling price is 125 Then you reduce selling price by 20% to get to cost