Enterprise: Strand 2 1


Sales are the value of the goods/ services sold by the business.


Net Sales = Sales – Sales Returns


For example, Cara sold eight masks @ €10 each. 8 × €10 = €80


2


Sales returns are the value of the goods returned to the business because they were damaged on delivery or faulty.


For example, Cara’s neighbour returned one of the masks to her because it was too small. Cara took the mask back and refunded €10. Sales = €80 – €10 = €70.


Income Statement 1 of Cara Flannery for week ended 21/08/20 € € €


1 Sales


2 Sales returns Net sales


3


4 5


Less cost of sales Opening stock Purchases


Purchases returns Net purchases


6 Less closing stock Gross profit


3


Opening stock is the stock which the business has at the start of the trading period, i.e. the closing stock from the end of previous period. It is stock which the business does not have to buy because it is carried forward.


For example, Cara fixes the mask returned to her and is starting off next week with one mask (€5). This is her opening stock.


5


Purchases returns are the goods returned to the supplier. They may be returned because they were damaged on delivery or they may be faulty.


For example, one of the elastic bands was faulty so Cara returned it to her supplier. He refunded her €5.


Net Purchases = Purchases – Purchases Returns 282 4


40 5


35 40 5


35 35


Purchases are the goods (raw material) bought to resell/make another product.


For example, Cara bought cloth, elastic bands and thread to make the masks. The cost of her purchases was €5. She makes eight masks with the material so the cost per unit is 5 × 8 = €40.


80 10


70 5


6


Closing stock is the stock left over at the end of the trading period. It will form the opening stock of the next trading period.


For example, Cara closes out her week with the one mask returned to her by her neighbour.


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