inventory account system
DESCRIPTION
This presentation is prepared as a part of project. Its about inventory accounting system.TRANSCRIPT
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INVENTORY ACCOUNT SYSTEMon
ABS Softech Pvt. Ltd.
GROUP NO. 6
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MEANING
• Inventory can be identified as tangible property held for sale in the ordinary course of business,
• Or in the process of production for such sale,• Or for the consumption in the production of
goods,• or services for sale
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• Types of company:– Merchandising– Manufacturing– Service
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TYPES OF INVENTORY
Types of Inventory
Manufacturing concerns
Raw Materials
Work-in-progress
Finished goods
Trading concerns
Finished Goods
Service Concerns
Tangible Assets
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Basis of Inventory Valuation
Cost Net Realizable value
Whichever is less
Value of Inventory
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INVENTORY ACCOUNT SYSTEM
• There are two principal systems of determining the physical quantities and monetary value of inventories sold and in hand– Periodic Inventory System– Perpetual Inventory System
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PERIODIC INVENTORY SYSTEM
• It is a method of ascertaining inventory• By taking an actual physical count of all the
inventory items on hand at a particular date on which inventory is required
• It is simple and less expensive than the perpetual system
• Stock amount is adjusted at the end of the accounting period to determine cost of goods
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PERPETUAL INVENTORY SYSTEM
• It is a system of recording inventory balances after each receipt and issue
• Physical stock should be checked and compared with recorded balances
• CoG issued is directly and SoG is taken as residual figure with the help of stock ledger
• Maintenance of stock ledger to have record of goods on continuous basis
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Distinction between PI and PIS• Based on physical verification• Provides information about
stock and CoS• Determine inventory and
takes CoGS as residual figure• CoGS-loss of goods as goods
not in stock are assumed to be sold
• Inventory control is not possible
• Simple and less exp.• Requires closure of business
for count stock
• Based on book records• Provides continuous
information about stock and CoS
• Determine CoS and compute stock as balancing figure
• CS- loss of goods as all unsold goods are assumed to be in inventory
• Inventory control can be exercised
• Costlier method• Determined without
affecting the operation
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INVENTORY METHODInventory Method
Not- Ordinary interchange
Historical Method
FIFO
LIFO
Weighted average price
Average Price
Base Stock
Not- Historical Method
Standard
Cost
Adjusted SP LPP
Ordinary interchange
Specific identification method