Using Figurewizard - Calculate Purchase of Goods

Purchases are calculated from cost of goods sold plus the change in value between opening and closing stock / inventory.

Cost of Goods Margin

Figurewizard calculates the value of purchases of goods for the year from the gross profit margin you enter on the form (e.g. 100% less GP 44% = 56%) plus the difference between opening and closing stock / inventory.

This is why you are not required to try to estimate annual purchases as our system calculates this for you from the information for gross profit margin and opening and closing stock / inventory values you enter on the form.

It is important to note that the gross profit margin that you enter must reflect not just the cost of goods but any charges incurred in getting them on the shelf, such as the cost of having the goods shipped to your business, import duty and import clearance charges as well as any added value materials or work performed in-house before offering them for sale. Such charges belong in cost of goods not overheads.

Calculating Purchases

The example below shows how annual purchases are calculated - The example assumes a gross profit margin of 44%, making the cost of goods sold margin for the year 56% of sales. The vlaue of opening stock or inventory is £20,000 and closing stock or inventory £35,000.

Sales £1,000,000
Cost of goods sold margin 56%
Opening stock / inventory £20,000
Closing stock / inventory £35,000
Increase in stock / inventory £15,000
add: Cost of goods sold £560,000
Annual Purchases £575,000

The monthly percentages of total annual purchases are then applied to the purchases account by our system in line with your monthly percentages of total annual sales. Our system calculates and applies all VAT transactions.

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