Inventory Flashcards
what is double entry for closing inventory
DR closing inventory
CR closing inventory/cost of sales
how do you valuate inventory
lower of cost or net realisable value
what is ‘cost’
what you pay for it and what you paid for it to get it to your location
what is ‘net realisable value’
revenue expected to be earned on the future when the goods are sold less any selling costs or modification costs to enable sale
what happens if goods have been lost or stolen
- no value in closing inventory
- original costs of the goods is removed from purchases
- cost of goods now charged as an expense
what are the methods of calculating cost of inventory
- LIFO (first in, last out)
- FIFO (first in, first out)
- AVCO (average cost)
what is the FIFO methods
assumes that first goods purchases are the first to be sold
what is the AVCO method
an average prive for all units in inventory is calculated. Issues are priced at the average cost.
what is the double entry to record drawings of inventory
DR drawings
CR purchases
what is the ‘gross profit margin on sales’
where gross profit is expressed as a percentage of sales
what is the ‘mark-up on cost’
where gross profit is expressed as a percentage of the cost of goods sold
what is the margin % equation?
gross profit / sales price x 100
what is the markup equation?
gross profit / cost price x 100
what is the double entry for cost of sales?
DR cost of sales
CR purchases
true or false, production overheads is calculated in cost?
true
