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I'm a bit confused of exactly what retained earnings consists of.
I start with 20k.
Say I bought £10k worth of goods.
I sell £8k of the goods at a price of £20k, so I have £2k in inventory.
The cost of distributing these goods is £500.
I pay wages to people doing the sales, say £500.
What is the retained earnings (under equity)?
Do we include wages and the distribution cost in this and why?
(I think we don't for COGS)
I start with 20k.
Say I bought £10k worth of goods.
I sell £8k of the goods at a price of £20k, so I have £2k in inventory.
The cost of distributing these goods is £500.
I pay wages to people doing the sales, say £500.
What is the retained earnings (under equity)?
Do we include wages and the distribution cost in this and why?
(I think we don't for COGS)
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#2
Work out the profit, add to opening capital, result closing capital.
Sales 20,000
Open Stock 0
purchases 10,000
Closing stock-2,000
Cost Goods Sold 8,000
Gross Profit 12,000
wages - 500
Distribution - 500
Net Profit 11,000
Bank open 20,000
Sales 20,000
Purchases -10,000
Wages -500
Distribution -500
Closing 29,000
Final Balance Sheet-Check
Stock 2,000
Bank 29,000
Assets 31,000
Opening capital 20,000
profits 11,000
Total 31,000
Do T accounts or similar to work it through, every debit has a credit being the maxim.
Sales 20,000
Open Stock 0
purchases 10,000
Closing stock-2,000
Cost Goods Sold 8,000
Gross Profit 12,000
wages - 500
Distribution - 500
Net Profit 11,000
Bank open 20,000
Sales 20,000
Purchases -10,000
Wages -500
Distribution -500
Closing 29,000
Final Balance Sheet-Check
Stock 2,000
Bank 29,000
Assets 31,000
Opening capital 20,000
profits 11,000
Total 31,000
Do T accounts or similar to work it through, every debit has a credit being the maxim.
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#3
(Original post by DQd)
I'm a bit confused of exactly what retained earnings consists of.
I start with 20k.
Say I bought £10k worth of goods.
I sell £8k of the goods at a price of £20k, so I have £2k in inventory.
The cost of distributing these goods is £500.
I pay wages to people doing the sales, say £500.
What is the retained earnings (under equity)?
Do we include wages and the distribution cost in this and why?
(I think we don't for COGS)
I'm a bit confused of exactly what retained earnings consists of.
I start with 20k.
Say I bought £10k worth of goods.
I sell £8k of the goods at a price of £20k, so I have £2k in inventory.
The cost of distributing these goods is £500.
I pay wages to people doing the sales, say £500.
What is the retained earnings (under equity)?
Do we include wages and the distribution cost in this and why?
(I think we don't for COGS)
Assuming you have 0 REs bf, ie new business, then your RE at year end is just your profits (less dividends).
So your profits are:
20k Income
(8k) CoS
(1k) Other costs
11k profit = Retained earnings
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