This document discusses inventory accounting systems. It describes two main systems - periodic and perpetual inventory systems. The periodic system involves taking a physical count of inventory at the end of an accounting period, while the perpetual system continuously records inventory receipts and issues in a stock ledger. The document also outlines the key differences between the two systems and various inventory valuation methods like FIFO, LIFO, weighted average cost.

1. INVENTORY ACCOUNT SYSTEM
on
ABS Softech Pvt. Ltd.
GROUP NO. 6

2. 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

3. • Types of company:
– Merchandising
– Manufacturing
– Service

4. TYPES OF INVENTORY
Types of Inventory
Manufacturing Trading concerns Service Concerns
concerns
Raw Materials Work-in-progress Finished goods
Tangible Assets
Finished Goods

5. Basis of Inventory Valuation
Cost Net Realizable value
Whichever is less
Value of Inventory

6. 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

7. 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

8. 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

9. Distinction between PI and PIS
• Based on physical • Based on book records
verification • Provides continuous
• Provides information about information about stock and
stock and CoS CoS
• Determine inventory and • Determine CoS and
takes CoGS as residual compute stock as balancing
figure figure
• CoGS-loss of goods as goods • CS- loss of goods as all
not in stock are assumed to unsold goods are assumed
be sold to be in inventory
• Inventory control is not • Inventory control can be
possible exercised
• Simple and less exp. • Costlier method
• Requires closure of business • Determined without
for count stock affecting the operation

10. INVENTORY METHOD
Inventory
Method
Not- Ordinary
interchange Ordinary
interchange
Historical Method Not- Historical
Method
Weighted
Average Base
FIFO LIFO average Specific
Price Stock
price identification
method
Standard Adjusted
Cost
LPP
SP