Question

UV Corporation reported year-end balances in the following accounts: 2018 2019 Accounts receivable $400 $600 Inventories 300 900 Accounts payable 200 800 Sales Revenue was $12,000 and cost of goods sold was $10,000 during 2019. What was the amount of cash paid to suppliers?

Answer 1

Ans.=

Inventory A/C

Particulars	Amount	Particulars	Amount
Opening balance	300	Cost of goods sold	10000
Purchases(Balancing Figure)*	10600	Closing balance	900
Total	10900	Total	10900

*Bal.Fig. = Total of credit balances - Total of debit balances = $10,900 - $300 = $10,600

So,

From Inventory a/c, we have derived total goods purchased during the year = $10,600

Now,

By incorporating it in Accounts payable ledger, we will get total cash paid during the year to the suppliers as the balancing figure.

  Accounts Payable

Particulars	Amount	Particulars	Amount
Cash Paid (Balancing Figure)	10000	Opening balance	200
Closing balance	800	Purchase	10600
Total	10800	Total	10800

Therefore,

Cash Paid to Suppliers = $10,000

ALTERNATIVELY,

Instead of using ledgers, we can find it through use of formulas=
Closing Stock = Op.Stock + Purchase - Cost of Goods Sold(COGS)
Hence,
Purchases = Closing Stock + COGS - Op.Stock
= 900 + 10000 -300
= 10600

Journal Entry for purchase = Purchase A/c Dr. 10,600

To, Accounts Payable A/c 10,600

Now,

Cash Paid To Suppliers = Op.balance of accounts payable + Purchases during the year - Closing balance of payables

= 200 + 10600 - 800

= 10,000

Journal Entry for cash paid to suppliers = Accounts Payable A/c Dr. 10,000

To, Cash A/c 10,000

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