Inventory for F3

   1.      Inventory should be valued at lower of cost and Net Realisable Value (NRV).

   2.      Cost of Good Sold = Opening Inventory + Purchase – Closing Inventory

   3.       Unsold Goods :

Unsold goods stay in the Inventory. So the purchase cost should not be included therefore in the cost of sales of the period.

   4.      Carriage Inwards is included in the cost of purchase.

   5.      Carriage outward is not included in the cost of purchase it is a selling expense.

   6.      Written down:

Goods in inventory which are either worthless or worthless than their original cost. Then what will do?

1.       Nothing, if they are worthless.

2.      Their net realisable value, if this is less than their original cost.

    7.      Journal for Closing inventory :

Debit                Inventory Account (Closing Inventory Value)

Credit               Income and Expense Account

    8.      Journal for Opening inventory :

Debit                Income and Expense Account

Credit               Inventory Account (Opening Inventory Value)

    9.      Cost can be arrived  at by using FIFO or AVCO (Weighted average costing)

    10.  Net Realisable Value:

            Inventories might be valued at their expected selling price, less any cost still to be incurred   in             getting them ready for sale and then selling them. This amount is referred to as the net    realisable value (NRV) of the inventories.

    11.   For finish goods :

            Fixed and variable production overheads that are incurred in converting material into   finished             goods. 

DISCLOSURE            DISCLOSURE            DISCLOSURE

ü  Accounting Policies adopted in measuring inventories.

ü  Total carrying amount of inventories and the carrying amount in classifications appropriate to the entity.

ü  Carrying amount of inventories carried at NRV

Tangible Non Current Asset

     1.      Capital Expenditure:

Capital Expenditure is expenditure which results in the acquisition of non-current assets, or an improvement in their earning capacity.

     2.      Revenue expenditure :

Revenue expenditure is expenditure which is incurred for either of the following reasons.  

To maintain the existing earning capacity of non current asset.

     3.      IAS -16 is for Property, Plant and equipment (Tangible non current asset) and depreciation

     4.      Depreciation:

1.      Reducing Balancing Method          2. Straight Line Method

    5.      Depreciation is charged against profit and deducted from the value of the non current asset in the      statement of financial position.

     6.      Residual value:

The residual value is the net amount which the entity expects to obtain for an asset to obtain for an asset at the end of its useful life after deducting the expected cost of disposal.

     7.      The annual depreciation charge = Cost of Asset – Residual value

   Expected useful life of the asset

    8.      Under the Reducing Balancing Method we do not deduct the residual value from the cost before     depreciating.

Intangible Asset

   1.      Intangible assets are non current assets is non-monetary asset without no Physical Substances. It    means which cannot be touched.

    2.      Intangible assets  are Capitalized in the accounts and will be Amortized.

    3.      Amortisation is the systematic allocation of the depreciable amount of an intangible asset over its useful life.

    4.      Amortization calculation :

                                                Cost- Residual value

                                                Estimated Useful Life

   The amortisation will begin when the asset is available for use

    5.      Expenditure on research much always be written off in the period in which it incurred.

    6.      Research and Development Debit balance is Expense and Asset

    7.      Research Cost should be recognised as an expense in the period in which they are incurred

    8.      Development Expenditure must be recognised as an intangible Asset.

    9.      PIRATE- Probable future economic benefit, Intention to complete, Resource to complete, Ability to use,  Technical feasibility of completing, Expenditure attributable to the intangible asset

    10.                                                              Disclosure

IAS38 requires both numerical and narrative disclosure for intangible assts.

Financial Statement should show a reconciliation of the carrying amount of intangible assets at the beginning and at the end of the period. The reconciliation should show the movement on intangible asset including:

Additions, Disposal, Reductions in Carrying amount,  Amortisation, Any other movements.

   11.  Financial statement should disclose the accounting policies for an intangible assets that have been adopted.

   12.  Disclosure is required:

Method of amortisation

Useful life of the assets

Gross carrying amount, the accumulated amortisation and the accumulated impairement losses as at the beginning and the end of the year.

 Easy memorise: Where the effect in amortisation, Research and Dvelopment

 Income Statement (Extract)

            Research Expenditure

            Development cost (Which didn’t fullfill the PIRATE)

            Amortisation of  capitalised development cost.

(to be continued)