Illustration of marked up by an additional amount
E Limited sent goods to its branch in Thika invoiced at selling price, which was cost plus 505 of cost. On 1st July 20X2, the opening stock in Thika was Shs 3 million at selling price. Goods at selling price of SHS 16.5 million were received by Thika in the year ended 30th June 20X3.
Branch Stock A/C
|
20X2
|
|
Shs 000
|
20X3
|
|
Shs 000
|
|
Jul 1
|
Balance b/f
|
3,000
|
Jun 30
|
Cashbook/debtors
|
16,800
|
|
20X3
|
|
|
|
|
|
|
June 30
|
Sundry a/c
|
16,500
|
|
|
|
|
Feb 28
|
Branch Markup a/c
|
1,600
|
Jun 30
|
Balance c/d
|
4,300
|
|
|
|
21,100
|
|
|
21,100
|
|
20X3
|
|
|
|
|
|
|
Jul 1
|
Balance b/d
|
4,300
|
|
|
|
Branch Mark Up A/C
|
20X3
|
|
Shs 000
|
20X2
|
|
Shs 000
|
|
Jun 30
|
Branch profit and loss a/c
|
6,400
|
July 1
|
Bal b/f
|
1,000
|
|
|
|
|
20X3
|
|
|
|
Jun 30
|
Bal c/d
|
1,700
|
Jun 30
|
Branch stock a/c
|
5,500
|
|
|
|
_____
|
Feb 28
|
Branch stock
|
1,600
|
|
|
|
8,100
|
|
|
8,100
|
|
|
|
|
20X3
|
|
|
|
|
|
|
July 1
|
Balance b/d
|
1,700
|
Workings
a.
|
Sales
|
Selling price
|
Gross profit
|
Cost of sales
|
|
|
Sh ‘000’
|
Sh ‘000’
|
Sh ‘000’
|
|
Total sales
|
16,800
|
6,400
|
10,400
|
|
Marked up goods (75% X Shs 7.6m)
|
5,700
|
2,700
|
3,000
|
|
Normal sales
|
11,100
|
3,700
|
7,400
|
b.
|
Closing stock
|
|
|
|
|
Total
|
4,300
|
1,700
|
2,600
|
|
Marked up goods
|
1,900
|
900
|
1,000
|
|
Normal sales
|
2,400
|
800
|
1,600
|
On 28th February 20X3, goods valued at selling price of Shs 6 million were marked-up by a further 40% of cost price. 75% of these goods were sold in the year ended 30th June 20X3. The remaining 25% were held in stock at 30th June 20X3. Sales for the year ended 30th June 20X3 amounted to Shs 16.8 million. Write up the Branch Stock and the Branch Mark-up accounts.
It can be seen that if goods are sold at a price in excess of the normal selling price, an additional profit is earned. Goods may be sold at a price in excess of the normal selling price without authority from the HO; if this occurs, the credit side of the branch stock account exceeds the debit side by the amount of the additional profits.