inventory Flashcards
Which system has a continuous record of inventory?
perpetual
How is there a continuous record of inventory in the perpetual system
stock cards/sheets
Stock take is necessary for which system
periodic
Stock take is necessary for periodic system to determine
ending inventory
COGS
gross profit
What are the disadvantages of stock takes
time consuming
disruptive to business
mistakes affect accuracy
Stock-take is still done once a year for perpetual system to ensure that
actual stock tallies with balance in inventory a’c
Which system offers more control over stock?
perpertual
Which system reveals shortages?
perpetual
Which system allows the determination of profit? why
perpetual.
COGS
Which system is more costly? why
Perpetual
additional staff hours
more paperwork
What are the inventory costing methods
FIFO
Weighted average
costing methods deal with only the
costs not the selling price
What are the new 3 costing methods in inventories 2?
fifo
lifo
weighted average
In rising prices, which one will have the highest profit? why
FIFO. COGS is lower, the unit costs of goods sold is cheaper.
Which one will have the highest current asset in times of rising prices. why?
FIFO. remaining unsold are bought later more expensive
Which system matches more closely to the actual movement of goods
FIFO
Which method gives a realistic profit figure
LIFO. current COGS with current prices of sale
Which method produces a better valuation of inventory.
FIFO. closing inventory at more recent cost price
Why is lifo unacceptable?
net profit is lower, taxation reduced
what is the estimated selling price called?
net realisable value
How can the net realisable value fall below cost?
physical deterioration
obsolescence
decline in price leel
What is the rule when valuing inventory
lower of cost and net realisable value
How is net realisable value calculated?
estimated selling price- estimated additional cost in making the sale
The loss of inventory value is recorded in P&l under
inventory-write down
An error in closing inventory will lead to what error in profit?
same number
same direction
an error in opening inventory will lead to what error in profit
same number
oppsosite
the cumulative years of profit for 2 years will be
the same amount
