AOS 1C

Question 1

Inventory

Answer 1

Goods purchased by a trading business for the purpose of resale.

Question 2

Physical Stocktake

Answer 2

The process of counting units of inventory on hand at a particular point in time.

Question 3

Inventory Sheet

Answer 3

Record used to note details of goods on hand when doing a physical stock-take.

Question 4

perpetual inventory

Answer 4

A system of recording movement of inventory items on a continuous basis throughout a reporting period.

Question 5

advantages of Perpetual inventory

Answer 5

1. greater control
2. identifies speed of turn over
3. more efficient reordering
4. interim profit reports
5. identifies inventory losses

Question 6

disatavantages of Perpetual inventory

Answer 6

1. additional record keeping
2. additional costs
3. doesn’t replace physical stocktake

Question 7

inventory account

Answer 7

Increasing in inventory Decreases in inventory

• Buying goods - Selling goods
• Inventory gain - Inventory loss
• Capital contribution - Drawings
  - Advertising

Question 8

FIFO

Answer 8

first in first out - it is assumed that the first inventory in is the first inventory out

Question 9

identified costs

Answer 9

identifies the actual cost price of each item in the inventory

Question 10

Mark up

Answer 10

cost price = selling price x 100

100 + mark-up

Question 11

inventory card

Answer 11

subsidiary record used to note down all movement of an individual inventory item.

Question 12

inventory loss

Answer 12

adjustment required when the number of units revealed by a physical stock-take is less than the number of units on an inventory card.

Question 13

inventory gain

Answer 13

adjustment required when the number of units revealed by a physical stock-take is greater than the number of units on the inventory card

Question 14

credit note

Answer 14

source document used to acknowledge the return of goods.

Question 15

purchase returns

Answer 15

returns of goods by a business to its supplier (accounts payable)

Question 16

sales returns

Answer 16

returns of goods by a customer (accounts receivable) to a business

Question 17

Product cost

Answer 17

cost added to the cost price of a unit of inventory

Question 18

period costs

Answer 18

cost written off as an expense for the reporting period

Question 19

net realisable value (NRV)

Answer 19

estimated selling price of an item of inventory, less any costs incurred in its selling, marketing or distribution

Question 20

inventory write down

Answer 20

general journal entry used to reduce the value of an item of inventory from its cost price

Question 21

accounts affected by inventory write down

Answer 21

inventory right down DR

inventory CR