topic 17 further incomplete records

Cards (11)

  • In cash based firms which do not operate a complete double entry system, with its associated regular checks, it is easy for things to go missing. Even firms who complete records may have an accident eg. burglary and have to work out missing items
  • Calculation of missing cash: cash account
    DR - Bal bd and receipts
    CR - Payments (incl takings banked) and bal cd
  • Calculating margin to mark up - Margin = 1/4 so Markup = 1/4-1 = 1/3
  • Calculating mark up to margin - Mark up = 1/4 so Margin = 1/4+1 = 1/5
  • Sometimes a business will not have record of takings, but if firm operates a set mark up on cost of sales, takings can be calculated by calculating gross profit, provided the owner can provide info on opening inventories, purchases and closing inventories. Takings are the missing figure
  • What the inventories should have been - The actual inventories = The missing inventories
  • Gross profit margin = GP/Revenue x 100%
  • Rate of inv turnover = CoS/Avg inv = Times
  • Profit in relation to revenue = PFTY/Revenue x 100%
  • Explain the accounting procedure used to identify whether cash is missing/stolen from a business:
    • cash book/cash account is the appropriate account to refer to
    • all receipts and payments will be entered on the relevant side
    • by comparing the total of all the cash they held on the debit side minus all the payments they made and cash they currently hold than any difference will reveal the amount of cash stolen
  • What is the difference between profit margin and markup:
    • markup - the % that is added to cost of sales to give the selling price
    • margin - the amount of profit made on sales as a %