Day: November 8, 2020

A manufacturing company transfers its products from factory to warehouse at cost of production plus 20%.

The following information is available.

Provision for unrealised profit brought forward at 1 October 2019   £18,000

Closing stock of finished goods at 30 September 2020                   £96,000

What is shown in the Profit and Loss Account for the year ended 30 September 2020 for the provision for unrealised profit?

Select ONE answer:

1. £1,200 credit
2. £1,200 debit
3. £2,000 credit
4. £2,000 debit

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct = £96k/ 1.2 = £80k * 20% = £16k provision required only so £2k credit to P&L account
4. Not correct

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