The document discusses accounting policies related to inventories. It defines inventories and outlines the objectives of accounting for inventories. The key considerations for valuation of inventories are determining cost, net realizable value, and comparing the two. Cost includes purchase cost, conversion cost and other costs. Common methods for valuing inventory are FIFO, LIFO and weighted average. Disclosures in financial statements include the accounting policy, cost formula used, and inventory classifications.
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hardware is an important part of a furniture system . without its knowledge furniture as we know it would not be useful in contemporary times, detailing and fixing are very important to design and execution of a good Interior.
This research paper does a detailed study on the production line of furniture, the processes from start to finish. It talks about the difference between chain production and parallel production lines and explains each step in manufacturing wooden furniture. The research also familiarizes with all the main types of machinery used during any kind of production,
A guide line for the student of Furniture design to know the requirment of a factory for the production of a piece of furniture.Enclosed is a manufacturing drawing of a Dining Chair with complete parts and operation.
The Duncan Residence was given to me in a profile with measurements for me to draft in AutoCad with no other information than the client's profile i.e. name, location, utilization of the space, occupants etc.
Here is the third topic of my series " The Basics of Guitar_Part I"...Go through the document carefully...Hope you will understand the topic easily...Follow my Facebook page (Any Body Can Play Guitar) for more guitar lessons...Thanks...
Kotler on Marketing (1999) is a modern management classic. Based on Kotler’s popular lecture series, it condenses the expertise from his world-renowned marketing textbooks into an invaluable manual for managers.
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Philip Kotler is considered one of the world's foremost experts on marketing. He is a professor of international marketing at Northwestern University’s Kellogg School of Management, and his book Marketing Management has been used to teach marketing in over 58 countries around the world. Kotler has also authored or coauthored over 50 other books, including Principles of Marketing, Marketing Models, and The Marketing of Nations.
Here is the third topic of my series " The Basics of Guitar_Part I"...Go through the document carefully...Hope you will understand the topic easily...Follow my Facebook page (Any Body Can Play Guitar) for more guitar lessons...Thanks...
Kotler on Marketing (1999) is a modern management classic. Based on Kotler’s popular lecture series, it condenses the expertise from his world-renowned marketing textbooks into an invaluable manual for managers.
About the Author
Philip Kotler is considered one of the world's foremost experts on marketing. He is a professor of international marketing at Northwestern University’s Kellogg School of Management, and his book Marketing Management has been used to teach marketing in over 58 countries around the world. Kotler has also authored or coauthored over 50 other books, including Principles of Marketing, Marketing Models, and The Marketing of Nations.
Company 1Company #1Income StatementBalance SheetAll numbers in thoLynellBull52
Company 1Company #1Income StatementBalance SheetAll numbers in thousandsAll numbers in thousandsRevenue20182017Period Ending20182017Total Revenue14,134,73212,866,757Current AssetsCost of Revenue9,510,2388,668,505Cash And Cash Equivalents1,290,2941,111,599Gross Profit4,624,4944,198,252Short Term Investments512-Operating ExpensesNet Receivables87,86875,154Selling General and Administrative2,576,0982,395,608Inventory1,641,7351,512,886Total Operating Expenses12,086,33611,064,113Other Current Assets11,84713,642Operating Income or Loss2,048,3961,802,644Total Current Assets3,151,1572,813,049Income from Continuing OperationsLong Term Investments7121,288Total Other Income/Expenses Net-7,676-16,488Property Plant and Equipment2,382,4642,328,048Earnings Before Interest and Taxes2,048,3961,802,644Other Assets187,718166,966Interest Expense-18,847-19,569Deferred Long Term Asset Charges--Income Before Tax2,040,7201,786,156Total Assets5,722,0515,309,351Income Tax Expense677,967668,502Current LiabilitiesNet Income1,362,7531,117,654Accounts Payable1,059,8441,021,735Short/Current Long Term Debt84,973-Other Current Liabilities9,90224,559Total Current Liabilities1,926,4021,752,506Long Term Debt311,994396,493Other Liabilities434,347412,335Total Liabilities2,672,7432,561,334Stockholders' EquityPreferred Stock--Common Stock3,7963,919Retained Earnings2,071,4001,801,138Treasury Stock-318,252-272,755Capital Surplus1,292,3911,215,806Total Stockholder Equity3,049,3082,748,017Net Tangible Assets3,049,3082,748,017
Company 2Company #2Income StatementBalance SheetAll numbers in thousandsAll numbers in thousandsRevenue20182017Period Ending20182017Total Revenue38,972,93435,864,664Current AssetsCost of Revenue27,831,17725,502,167Cash And Cash Equivalents3,030,2002,758,477Gross Profit11,141,75710,362,497Short Term Investments-506,165Operating ExpensesNet Receivables860,000327,166Selling General and Administrative6,923,5646,375,071Inventory4,579,0004,187,243Total Operating Expenses34,754,74131,877,238Other Current Assets-12,217Operating Income or Loss4,218,1933,987,426Total Current Assets8,469,2008,485,727Income from Continuing OperationsLong Term Investments--Total Other Income/Expenses Net-44,982-130,838Property Plant and Equipment5,255,2005,006,053Earnings Before Interest and Taxes4,218,1933,987,426Goodwill97,600100,069Interest Expense-8,860-64,295Intangible Assets-144,900Income Before Tax4,173,2113,856,588Other Assets504,000321,266Income Tax Expense1,113,4131,248,640Deferred Long Term Asset Charges-6,558Net Income3,059,7982,607,948Total Assets14,326,00014,058,015Current LiabilitiesAccounts Payable2,644,1002,488,373Short/Current Long Term Debt--Other Current Liabilities-1,429,136Total Current Liabilities5,531,3005,125,537Long Term Debt2,233,6002,230,607Other Liabilities1,512,5001,331,645Total Liabilities9,277,4008,909,706Stockholders' EquityPreferred Stock--Common Stock5,048,600628,009Retained Earnings-4,962,159Treasury Stock--441,859Capital Surplus--Other Stockholder Equity--4 ...
Various method of Inventory Accounting.pptxSoumajitRoy33
There are three methods for inventory valuation: FIFO (First In, First Out), LIFO (Last In, First Out), and WAC (Weighted Average Cost).
In FIFO, you assume that the first items purchased are the first to leave the warehouse. In other words, whenever you make a sale, under FIFO, the items will be subtracted from the first list of products which entered your store or warehouse.
In LIFO, you make the opposite assumption: that the last items that enter your store are the first ones to leave.
The WAC method uses the item’s average cost throughout the year. The average cost per unit is calculated by dividing the total cost by the total number of units purchased during the year.
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3. Objectives
Meaning of accounting policies
Considerations in selection of Accounting Policies
Disclosure of Accounting Policies
Fundamental Accounting Assumptions
Deviations in Accounting Assumptions
4. To promote better understanding of Financial
Statement by establishing through an accounting
standard:
• The Disclosure of Significant Accounting Policies,
and
• The Manner of their disclosure
5. Meaning of Accounting Policies
Accounting policies refer to specific accounting
principles and the method of applying those principles
adopted by the enterprises in preparation and
presentation of the financial statement.
6. Primary consideration in selection of accounting policies
is that it should reflect a true and fair view
For this purpose, use the canons of :
• Prudence
• Substance over form
• Materiality
7. PRUDENCE
Where uncertainty attached to future events,
• Anticipate no profits
• Provide for all possible losses and liabilities even if
amount cannot be determined with certainty
8. SUBSTANCE OVER FORM
The accounting treatment and presentation in financial
statements of transactions and events should be
governed by their substance and not merely by the legal
form
9. MATERIALITY
• FS should disclose all 'material' items,
• Item is regarded material if knowledge of it might
influence the decisions of the user of the financial
statements.
10. For proper and better understanding of financial
statement, it is required that all significant accounting
policies followed in preparation of financial statement
should be disclosed. Because assets and liabilities in
balance sheet and profit and loss account are
significantly affected by accounting policies followed.
12. • Enterprise normally viewed as a going concern,
• It means continuing in operation for the
foreseeable future.
• Assumed that enterprise has no intention/
necessity of liquidation or of curtailing materially
the scale of the operations.
13. It is assumed that accounting policies are consistent from
one period to another.
14. • Revenues recognised as they are earned
• Costs are recognised when incurred
• Receipt or payment of money has no relevance
• Revenues and costs recorded in the period to which they
relate
15. If above assumptions followed - No specific disclosure
is required.
If above assumptions not followed, the fact should be
disclosed
16.
17. Objectives
Definition
Measure of inventories
Determination of Cost of Inventories
Determination of net realizable value of Inventories.
Comparison between the cost and net realizable value
Methods of computing Inventories
Disclosure in financial statements
18. Objective of Accounting
Standards
The basic objective of accounting standards is to
remove variations in the treatment of several
accounting aspects and to bring about standardization
in presentation
The ACCOUNTING STANDARDS BOARD (ASB)
which functions under ICAI issues accounting
standards
19. Objective
Valuation of Inventories
Formulate the method of computation of cost of
inventories/stock.
Determining the value of closing stock at which it is
to be shown in balance sheet till it is not sold and
recognized as revenue.
20. Definition
Inventories are assets:
Held for the sale in the ordinary course of
business (Finished Goods).
In the process of production of such sale
(Raw material and working progress).
In the form of materials and supplies to be
consumed in the production process or in
the rendering of services (Stores, Spares,
Raw material).
Inventories do not include machinery.
21. Measure Of Inventories
Inventories should be valued at the lower of cost
and net resale value
MAJOR POINTS FOR VALUATION OF INVENTORIES
Determination of cost of Inventories
Determination of net realizable value of
inventories
Comparison between the cost and net
realizable value
22. Determination of Cost of
Inventories
Cost of Inventories Includes:
Cost of Purchase
Cost of Conversion
Other Costs
23. Cost Of Purchase
Cost of Purchase Price includes :
• Duty and Purchase Price
• Taxes
• Freight Inward
• Other Expenditure directly attributable to
the acquisition.
Less :
• Duties and taxes recoverable by enterprises
from taxing authorities
• Trade discount
24. Example
Purchase Price 100 x 10 1000
Less : Trade Discount -100
Net Price 900
Add : Sales Tax +36
Less : Refundable Duties -100
Add : Transportation & Loading Chg +50
Total Cost of Purchases 886
25. Cost of Conversion
Includes cost directly related to units of
production
E g. Direct labour , Direct expenses ,
production overheads
Overheads are classified as fixed and
Variable overheads that are incurred in
converting material into finished goods.
26. Other Costs
Cost incurred in bringing the inventories to
their present location and condition
Excise duty contributes directly to bringing
the inventories to its present location and
condition
Excise duties is direct costs, which should be
included in the valuation of inventories
27. Exclusion From Cost of
Inventories
Abnormal amounts of wasted materials,
labour or other production cost
Storage cost unless they are necessary in
the production process
Administrative cost
Selling & distribution cost
28. Determination of net
realizable value of Inventories.
Net realizable value means
Estimated selling price - Estimated cost - Estimated costs
in ordinary course of of completion necessary to make
business sale
If the finished product is sold at cost or above cost, then the
estimated realizable value of raw material and supplies is
considered more than its cost.
If the finished product is sold below cost, then the estimated
realizable value of raw material or supplies is equal to
replacement price of raw material or supplies.
29. Comparison between the cost
and net realizable value
The comparison between the cost and net
realizable value should be made by
grouping the items.
30. Example of comparison
Item Historical NRV Valuation
X 20000 30000 20000
y 12000 10000 10000
Z 28000 26000 26000
A 12000 18000 12000
32. First-in, First-out (FIFO)
This method assumes that inventory purchased first is
sold first. Therefore, inventory cost under FIFO
method will be the cost of latest purchases. Consider
the following example:
33. Example
Bike LTD purchased 10 bikes during January and sold 6 bikes,
details of which are as follows:
January 1 Purchased 5 bikes @ $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes @ $70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January
may be calculated as follows:
The sales made on January 5 and 10 were clearly made from
purchases on 1st January. Of the sales made on January 25, it
will be assumed that 2 bikes relate to purchases on January 1
whereas the remaining one bike has been issued from the
purchases on 15th January. Therefore, the value of inventory
under FIFO is as follows:
34. Solution
Date Purchase Issues Inventory
Units $/Units $ Total Units $/Units $ Total Units $/Units $ Total
Jan 1 5 50 250 - - - 5 50 250
Jan 5 -- - - 2 50 100 3 50 150
Jan 10 - - - 1 50 50 2 50 100
Jan 15 5 70 350 - - - 5 70 350
Jan 15 - - - - - - 7 - 450
Jan 25 - - - 2 50 100 - - -
1 70 70 4 70 280
As can be seen from above, the inventory cost under FIFO method relates to the cost
of the latest purchases, i.e. $70
35. Last-in, First-out(LIFO)
This method assumes that inventory purchased last is
sold first. Therefore, inventory cost under LIFO
method will be the cost of earliest purchases.
Consider the following example:-
36. Example
Bike LTD purchased 10 bikes during January and sold 6 bikes,
details of which are as follows:
January 1 Purchased 5 bikes @ $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes @ 70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January
may be calculated as follows:
The sales made on January 5 and 10 were clearly made from
purchases on 1st January.
However, all sales made on January 25 will be assumed to have
been made from the purchases on January 15. Therefore, the
value of inventory under LIFO is as follows:
37. Solution
Date Purchase Issues Inventory
Units $/Units $ Total Units $/Units $ Total Units $/Units $ Total
Jan 1 5 50 250 - - - 5 50 250
Jan 5 - - - 2 50 100 3 50 150
Jan 10 - - - 1 50 50 2 50 100
Jan 15 5 70 350 - - - 5 70 350
Jan 15 - - - - - - 7 - 450
Jan 25 - - - 3 70 210 2 50 100
2 70 140
4 - 240
38. Weighted average Cost (WAC)
This method assumes that the goods available for the
sale are homogeneous
The average cost is computed by dividing the cost of
goods available for sale by the number of the units
available by sale. Consider the following example:-
39. Example
Bike LTD purchased 10 bikes during January and sold
6 bikes, details of which are as follows:
January 1 Purchased 5 bikes @ $50 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes @ 70 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of
January may be calculated as follows:
All issues of inventory will be assumed to carry the
average cost of all purchases up to the date of the
issue. Average cost will be calculated by dividing total
units of inventory by the total cost.
40. Solution
Date Purchase Issues Inventory
Units $/Units $ Total Units $/Units $ Total Units $/Units $ Total
Jan 1 5 50 250 - - - 5 50 250
Jan 5 - - - 2 50 100 3 50 150
Jan 10 - - - 1 50 50 2 50 100
Jan 15 5 70 350 - - - 5 70 350
Average Cost of Inventory 7 64.28 450
Jan 25 - - - 3 64.28 192.85 4 64.28 257.14
Average cost of inventory changes every time a purchase is made at a different price.
Therefore the average cost of inventory changed from $50 to $64.286 after the
purchase on January 15
41. Example
Glucose Labs manufactures glucose for use in medicine. On 1 December 2012,
the company had 5 tons of sucrose (which is a raw material) costing $5,000,
during the month it purchased 200 tons for $220,000, 3 tons remained at the
year-end costing $3,000. Its labor cost amounted to $10,000 while its overheads
were $15,000. Work-in-process inventory on 1 December 2012 was worth $10,000
while the work-in-process inventory as at 31 December 2012 was $8,000. Finished
goods inventory as at 1 December 2012 was $25,000 while cost of goods sold for
December amounted to $240,000. Find the finished goods.
Solution:
Finished goods produced = opening raw materials inventory ($5,000) + raw
materials purchased ($220,000) − closing raw materials inventory ($3,000) +
labor ($10,000) + overheads ($15,000) + opening work in process inventory
($10,000) − closing work in process ($8,000) = $249,000
Finished goods at the end of a period = finished goods at the start of period
($25,000) + finished goods produced ($249,000) − finished goods sold
($240,000) = $34,000.
42. Disclosure in financial
statements
Accounting policy adopted in measuring inventories
Cost formula used
Classification of inventories like Finished Goods, WIP,
Raw Materials, Spare Parts.