1. INVENTORIES CONTROL
A FLIPPED LESSON FOR TCE ACCOUNTING STUDENTS

2. NATURE OF INVENTORIES
• ITEMS HELD BY THE BUSINESS TO SELL AT A PROFIT

3. IMPORTANCE OF
INVENTORIES

4. CLICK ON ONE OF THE LEMONADE
GAMES

5. IMPORTANCE OF INVENTORIES
• INVENTORIES ARE THE DRIVER OF SALES AND PROFIT FOR THE BUSINESS.
• A HIGH TURNOVER OF INVENTORIES MEANS A HIGHER CASH FLOW.
• A LOT OF MONEY IS INVESTED IN INVENTORIES
• TO MEET CUSTOMER DEMAND BY OFFERING INVENTORIES THAT THEY WANT
AND AT THE RIGHT PRICE. QUALITY AND TYPE OF GOODS OFFERED FOR SALE.
• TO OFFER A RANGE OF INVENTORIES THAT CUSTOMERS CAN CHOOSE FROM.

6. PERPETUAL INVENTORY METHOD
• THE METHOD OF ACCOUNTING FOR INVENTORIES THAT KEEPS A CONTINUOUS
RECORD OF ALL INVENTORIES PURCHASED AND SOLD.

7. COST PRICE AND SALES PRICE
• KEEP RECORD OF COST PRICE (COGS) AND SALE PRICE OF INVENTORIES (SALES)

8. STOCK CARDS
• USE OF STOCK CARDS FOR EACH ITEM

9. • A STOCK TAKE IS
TAKEN AT REGULAR
INTERVAL TO CHECK
THE RECORD OF
INVENTORIES
CONTROL ACCOUNT.

10. INVENTORIES
ADJUSTMENT
• DISCREPANCY BETWEEN
ACTUAL NUMBER FROM
STOCK TAKE AND RECORD
OF INVENTORIES CONTROL
ACCOUNT.

11. INVENTORIES ADJUSTMENT
• EXAMPLES OF STOCK LOSS AND GAIN
• VIEW CLIP:
• “WHY AN INVENTORIES ADJUSTMENT IS REQUIRED”

12. INVENTORIES ADJUSTMENT - LOSS
• THEFT.
• OVER SUPPLY TO CUSTOMER.
• UNDERSUPPLY FROM A SUPPLIER.
• DAMAGES AND BREAKAGES.
• STOCK TAKE ERROR.

13. INVENTORIES ADJUSTMENT - GAIN
• OVERSUPPLY FROM A SUPPLIER
• UNDERSUPPLY TO A CUSTOMER
• STOCK TAKE ERROR.

14. GENERAL JOURNAL ENTRIES
• VIEW CLIP
• “ACCOUNTING FOR AN INVENTORY ADJUSTMENT”

15. INVENTORIES ADJUSTMENT – IMPACT ON
PROFIT
• INVENTORY LOSS – EXPENSE – DECREASE
PROFIT.
• INVENTORY GAIN – REVENUE – INCREASE
PROFIT.

16. CONTROL OVER INVENTORIES
• STORAGE
• PURCHASE
• SALE
• SIZE / LEVEL OF INVENTORIES

17. MANAGING INVENTORIES – STORAGE &
SECURITY
• SOME INVENTORY ITEMS CAN BE STOLEN, GET LOST OR BECOME DAMAGED OR
SPOILT.
LEADS TO DISCOUNTING ITEMS AND LOWER PROFITS.
• SECURITY TO PREVENT THEFT AND PILFERING BY STAFF.
• SECURITY METHODS INCLUDE:
TAGS, SCANNERS, CAMERAS, BAG CHECKS, SECURITY STAFF.

18. MANAGING INVENTORIES - PURCHASE
• JUST IN TIME PURCHASING TO MAINTAIN OPTIMUM LEVELS OF INVENTORIES
• BIG INVESTMENT IN INVENTORIES.
• TOO LITTLE TURNS OFF CUSTOMERS.
• TOO MUCH INCREASES COSTS OF STORAGE – RENT OF PREMISES AND
WAREHOUSE.
• NEED TO MANAGE REORDER POINT, REORDER QUANTITY AND LEAD IN TIME FOR
DELIVERY.

19. MANAGING INVENTORIES - SALE
• Take orders and freight in the
next day.
• Quick dispatch of orders and
delivery.
• Maintain accurate inventory
levels.
• Increase inventories turnover.

20. INVENTORY TURNOVER
• INVENTORY TURNOVER
(STOCK TURNOVER)=
• COST OF GOODS SOLD
AVERAGE STOCK
• VARIES WITH EACH
INDUSTRY.
• THE HIGHER THE BETTER.

21. INVENTORIES TURNOVER
• COGS = $265000
• INVENTORIES 1/7/13 = $90000
• INVENTORIES 30/6/14 = $110000
• = AVERAGE INVENTORIES = (90000+110000)/2 = 100000
• INVENTORIES TURNOVER = COGS/AVERAGE INVENTORIES
• =265000/100000
• =2.65 TIMES

22. TAKE THE TEST
• YOU WILL BE SENT LOGIN
DETAILS FROM CLASSMARKER.
• YOU HAVE 20 MINUTES.
• ONE GO.
• IT WILL BE ASSESSED.