AOS 1C Flashcards
Inventory
Goods purchased by a trading business for the purpose of resale.
Physical Stocktake
The process of counting units of inventory on hand at a particular point in time.
Inventory Sheet
Record used to note details of goods on hand when doing a physical stock-take.
perpetual inventory
A system of recording movement of inventory items on a continuous basis throughout a reporting period.
advantages of Perpetual inventory
- greater control
- identifies speed of turn over
- more efficient reordering
- interim profit reports
- identifies inventory losses
disatavantages of Perpetual inventory
- additional record keeping
- additional costs
- doesn’t replace physical stocktake
inventory account
Increasing in inventory Decreases in inventory
- Buying goods - Selling goods
- Inventory gain - Inventory loss
- Capital contribution - Drawings
- Advertising
FIFO
first in first out - it is assumed that the first inventory in is the first inventory out
identified costs
identifies the actual cost price of each item in the inventory
Mark up
cost price = selling price x 100
100 + mark-up
inventory card
subsidiary record used to note down all movement of an individual inventory item.
inventory loss
adjustment required when the number of units revealed by a physical stock-take is less than the number of units on an inventory card.
inventory gain
adjustment required when the number of units revealed by a physical stock-take is greater than the number of units on the inventory card
credit note
source document used to acknowledge the return of goods.
purchase returns
returns of goods by a business to its supplier (accounts payable)
sales returns
returns of goods by a customer (accounts receivable) to a business
Product cost
cost added to the cost price of a unit of inventory
period costs
cost written off as an expense for the reporting period
net realisable value (NRV)
estimated selling price of an item of inventory, less any costs incurred in its selling, marketing or distribution
inventory write down
general journal entry used to reduce the value of an item of inventory from its cost price
accounts affected by inventory write down
inventory right down DR
inventory CR
