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