03 01 07 Inventories Flashcards
1
Q
What items (4) make up costs of goods sold?
A
1) Opening Inventory. 2) Purchases
3) Carriage Inwards 4) Less Inventory Closing§
2
Q
What is the double entry journal for closing inventory adjustments?
A
Closing Inventory (SOFP) - Debit (asset) Closing Inventory (SPL) - Credit (reduction in costs of goods sold)
3
Q
How should inventories value be measured?
A
At the lower of net realisable value and cost
4
Q
How do you calculate net realisable value?
A
Estimate selling price - costs of completion - distribution costs
5
Q
Describe FIFO
A
First in First out - the first goods to be purchased are the first ones to be sold
6
Q
Describe AVCO
A
Weighted Average Cost - An average is taken of cost of goods purchase
7
Q
Describe LIFO
A
Last in First out - The goods purchased last will be sold first