Illustrative Example: Retailer Ltd: Preparation of financial statements

Retailer Ltd, recorded the following transactions during the year:

Rm

Sales :57,959

Other non-current assets : 6,304

Cost of sales :55,033

Trade and other receivables: 1,607

Trade and other payables: 8,568

Administration expenses :1,860

Loans (due after one year) :10,711

Loans (due within one year): 2,826

Other current liabilities :7,901

Property, plant and equipment: 17,978

Goodwill :2,874

Finance income :29

Other current assets: 4,246

Cash :3,082

Share capital and premium :5,502

Pension liabilities :3,175

Finance costs :693

Taxation cost: 49

Inventories :2,430

Investments (long term) :1,920

Investments (short term) :3,463

Taxation payable: 419

Other non-current liabilities :1,688

Retained earnings :3,114

Profit or loss

1. Retailer Ltd has recorded sales of R57,959m for the year. Under accounting

rules, when is turnover recorded in the Statement of Comprehensive Income

when the order is placed, when the order is delivered, when the invoice is

sent, or when the cash is received?

2. Retailer Ltd has cost of sales of R55,033m. What types of costs would be

included in cost of sales?

3. Retailer Ltd achieved an operating margin (operating profit/sales) of 1.8%. Is

this good or bad?

4. How much dividend should Retailer Ltd pay?