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§

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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)
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3
Q

How should inventories value be measured?

A

At the lower of net realisable value and cost

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4
Q

How do you calculate net realisable value?

A

Estimate selling price - costs of completion - distribution costs

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5
Q

Describe FIFO

A

First in First out - the first goods to be purchased are the first ones to be sold

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6
Q

Describe AVCO

A

Weighted Average Cost - An average is taken of cost of goods purchase

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7
Q

Describe LIFO

A

Last in First out - The goods purchased last will be sold first

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