Question 1 Introduction
Cost of sales is arrived at by deducting opening inventory from purchases and then deducting closing inventory.
The financial statements - the income statement and the statement of financial position - are produced using figures from the trial balance.
The financial statements of a business are produced only at the financial year end.
The trading section of the income statement includes items such as sales, purchases, returns and expenses, eg insurance.
Gross profit, calculated in the the trading section of the income statement, is arrived at by deducting cost of sales from sales.
Cost of sales is arrived at by deducting opening inventory from purchases and then deducting closing inventory.
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