A club’s tuck shop or canteen is shown as a single trading profit or loss. To find it, rebuild the purchases first, then work out the cost of goods sold, then subtract it from sales.
This lesson is part of clubs and societies accounts. It uses the same trading idea as in the sole trader statements.
What are the steps?
Follow the order. Rebuild purchases, then cost of goods sold, then trading profit, then deduct direct expenses.
Skipping the first step is the usual error, because the question gives cash paid rather than purchases.
Worked example: the drama club tuck shop
The club’s tuck shop has the following figures for the year.
- Sales: RM4 900.
- Opening inventory: RM400. Closing inventory: RM500.
- Cash paid to suppliers: RM3 200.
- Creditors: RM300 at the start and RM700 at the end.
- Purchases = cash paid + closing creditors − opening creditors = 3 200 + 700 − 300 = RM3 600.
- Cost of goods sold = 400 + 3 600 − 500 = RM3 500.
- Trading profit = 4 900 − 3 500 = RM1 400.
If a helper is paid RM500 for the tuck shop, the net result is 1 400 − 500 = RM900. That single figure is entered on the income side of income and expenditure.
| Line | Amount (RM) |
|---|---|
| Sales | 4 900 |
| Less cost of goods sold | 3 500 |
| Trading profit | 1 400 |
| Less helper’s wages | 500 |
| Net profit of tuck shop | 900 |
The mistake that costs marks
The slip is to use the RM3 200 cash paid as purchases. That ignores the rise in creditors, so the cost of goods sold comes out RM400 too low.
| Step | Wrong | Right |
|---|---|---|
| Purchases | 3 200 | 3 600 |
| Cost of goods sold | 3 100 | 3 500 |
| Trading profit | 1 800 | 1 400 |
The second slip is to list RM4 900 sales and RM3 600 purchases separately in income and expenditure, which double counts the activity. Enter the net result once.
Why is the order important?
Each step feeds the next. A wrong purchases figure flows into cost of goods sold and the profit, so one early slip corrupts every line below it.
Write each subtotal on its own line so a marker can follow the working.
Check yourself
Sales are RM6 000. Opening inventory is RM300 and closing inventory is RM450. Purchases were RM4 100. Find the trading profit.
Answer
Cost of goods sold = 300 + 4 100 − 450 = RM3 950.
Trading profit = 6 000 − 3 950 = RM2 050.
If direct wages were RM500, the net result would be RM1 550.
What to study next
Continue with preparing the accumulated fund and financial position. For a teacher to guide your working, see online one-to-one Accounting tuition.