8/3/2019 Material Cost Expenses Finance Theory ExpertsMind

1/2

www.ExpertsMind.com|Finance Assignment Help|Financial Management

Material Cost, Expenses

Calculation of expenses from the payment side

Only revenue payments are transferred to expenses side after making adjustments for outstanding and prepaid

expenses.

Example: receipts and payments A/c (31.12.2007)

Receipts $ Payments $

By salary 15000

Adjustments:

$

(i) Salary outstanding at the end of 2007 5000

(ii) Salary outstanding at the end of 2006 2000

(iii) Salary paid in advance at the end of 2006 1500

(iv) Salary paid in advance at the end of 2007 1000

Solution:

$

Total salary paid 15000

Add: salary outstanding at the end of the current year 5000

Add: salary prepaid in the beginning of the current year 1500

Less: outstanding salary at the beginning of the current year 2000

Less: prepaid salary at the end of the current year 1000

Debited to income and expenditure account 18500

Calculation of cost of material consumed during the year

There are some materials of which the opening and closing stock are mentioned in the question and also the

payment made in respect of such material is shown on the credit side of the receipts and payments account, e.g

stationary, sports material, postage, foodstuffs, medicines etc. these are known as consumable goods. Their valu

http://www.expertsmind.com/http://www.expertsmind.com/http://www.expertsmind.com/finance-homework-assignment-help.aspxhttp://www.expertsmind.com/finance-homework-assignment-help.aspxhttp://www.expertsmind.com/finance-homework-assignment-help.aspxhttp://www.expertsmind.com/finance-management/http://www.expertsmind.com/finance-management/http://www.expertsmind.com/finance-management/http://www.expertsmind.com/finance-management/http://www.expertsmind.com/finance-homework-assignment-help.aspxhttp://www.expertsmind.com/

8/3/2019 Material Cost Expenses Finance Theory ExpertsMind

2/2

is calculated with the help of following formula:

Calculation of consumed part of stationary/medicines/sports equipment etc

Receipts and payments A/c (31.12.2007)

Example:

Receipts $ Payments $

By stationary or

By medicine or

By sports equipment 10000

Adjustments:

$

(i) Opening stock of stationary/medicine/sports equipment 25000

(ii) Purchase of stationary/medicine/sports equipment 10000

(iii) Advance paid to suppliers in the beginning of the current year 5000

(iv) Advance paid to supplier at the end of the current year 8000

(v) Amount outstanding to suppliers at the end of current year 1000

(vi) Closing stock of stationary/medicine/sports equipments 3500

(vii) Amount outstanding to suppliers in the beginning of current year 3000

Calculate the amount of stationary/medicine/sports equipments consumed during the current year.

Solution: statement showing stationary/medicine/sports equipments consumed during the year:

Opening stock of stationary/medicine/sports equipment 25000

Add: purchases (or payments made during the year) 10000

Add: outstanding amount at the end of current year 1000

Add: prepaid amount at beginning of current year 5000Less: outstanding amount at the beginning of current year 3000

Less: prepaid amount at the end of current year 8000

Less: closing stock 3500

Consumed part to be debited to income and expenditure account 26500