Week 7- Inventory Flashcards
What are the two types of way of recording inventory?
Periodic and perpetual
what are the ways of measuring inventory held in stock?
First in- First out (fifo)
Weighted average
Last in- Last out
what is the big difference between perpetual and periodic methods of recording inventory?
In the Perpetual method, inventory is always kept up to date and a stocktake will confirm your inventory balance. However, in the periodic method, the balance of inventory is only determined at the end of the year
what type of method for recording inventory is most used now?
Perpetual because most businesses are computerised now
describe the process of first in first out measuring
It presupposes that the stock that was purchased first is sold first
describe the process of weighted average measuring
the average value of all of a particular stock on hand is used to calculate the cost of one item of stock.
only when does the weighted average cost change?
When you buy stock at a different price to your originally calculated weighted average
decribe the process of Last in first out measuring
The opposite of FiFo and presupposes that the last stock is the first stock sold.
Why is LIFO not used much by businesses?
It doesn’t adhere to IFRS requirements
how do u calculate gross profit?
Net sales - cost of sales =Gross profit
How do u calculate Net sales?
sales- sales returns
how do u calculate cost of sales?
Opening inventory + net purchases - closing inventory
how do you calculate net purchases
Purchases - purchase returns + any other costs which were required to bring the stock to the point of sale eg. Insurances/wages
Are transport costs after the point of sale part of operating expenses
no
what figures do u need to calculate markup or Gross profit percentage
any two of: Selling price, cost price or gross profit
