Adrian L.

Galapon
 Inventories

Merchandising Manufacturing
Held for sale in the ordinary Merchandise Finished Goods
course of business Inventory
In process of production Work in Process
Materials or supplies used in Materials/Factory
production Supplies
Cost of Inventories
1. Purchase price
2. Import duties and other nonrecoverable taxes (customs duties, percentage tax,
input Vat of non-Vat registered taxpayer)
3. Directly attributable costs – transport, handling, insurance, etc.
4. Conversion costs (not to include abnormal wastage)
Other costs
1. Borrowing costs or interest during production of inventories which take substantial
time to produce.
2. Storage costs – when products require a maturation process.
3. Costs of designs for custom products.
 WHO OWNS THE INVENTORY?
• Goods in transit FOB shipping point/CIF Buyer
• Goods in transit FOB destination Seller
• Consigned goods Consignor (delivery to consignee is
added/deducted back if returned)
• Sales out on approval Seller Unless it experience shows that
• Sales with buyback agreement Seller sales is usually completed.
• Sales with high rates of returns Buyer
• Sales on installments Buyer
• Segregated goods in the warehouse (Special- Buyer If there is a deferred delivery, if
order/per sales contract) buyer is to blame, then sales is
• Segregated goods in the warehouse (Hold for shipping Seller considered completed.
instruction)
• Segregated goods in the warehouse (Bill and hold) Buyer if holding is for buyer’s
instruction/convenience
 MARITIME SHIPPING TERMS
1. FAS /free alongside – Buyer - on board vessel
2. CIF – Buyer - on transit
3. Ex-ship – Buyer - when unloaded on vessel

Goods in company premises are your inventory (unless damaged)

1. Receiving Department
2. Window display
3. Counter display
 EXCLUDED FROM INVENTORIES

- Abnormal amounts of wasted materials, labor, or other production costs

- Storage costs (unless essential to the production process)
- Administrative overheads unrelated to production
- Selling costs
- Foreign exchange differences arising directly on the recent acquisition of inventories invoiced in a
foreign currency
- Interest cost when inventories are purchased with deferred settlement terms
 Cost Flow

1.First-In, First-Out Method

2.Last-In, First Out Dec. 1 Balance, 1,000 lbs. @ $20.
10Issued 500 lbs.
3.Moving Average 15Purchased 1,000 lbs. @ $24.
20Issued 250 lbs.
26Issued 500 lbs.
28Purchased 500 lbs. @ $26.
30Issued 500 lbs.
31Balance, 750 lbs.

Accounting for Factory Overhead 33

 Cost Flow

Dec. 1 Balance, 1,000 lbs. @ $20. 1,000

10 Issued 500 lbs. (500)
15 Purchased 1,000 lbs. @ $24. 1,000
20 Issued 250 lbs. (250)
26 Issued 500 lbs. (500)
28 Purchased 500 lbs. @ $26. 500
30 Issued 500 lbs. (500)
750

500 26 13,000
250 24 6,000
Total 19,000

Accounting for Factory Overhead 34

 Cost Flow

First-In First Out Method

Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000

Accounting for Factory Overhead 35

 Cost Flow

First-In First Out Method

Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000

Accounting for Factory Overhead 36

 Cost Flow

First-In First Out Method

Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000

Accounting for Factory Overhead 37

 Cost Flow

First-In First Out Method

Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000

Accounting for Factory Overhead 38

 Cost Flow

First-In First Out Method

Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000

Accounting for Factory Overhead 39

 Cost Flow

First-In First Out Method

Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 20 5,000

Accounting for Factory Overhead 40

 Cost Flow

First-In First Out Method

Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 20 5,000 250 20 5,000
1,000 24 24,000

Accounting for Factory Overhead 41

 Cost Flow

First-In First Out Method

Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 20 5,000 250 20 5,000
1,000 24 24,000
26-Dec 250 20 5,000
250 24 6,000

Accounting for Factory Overhead 42

 Cost Flow

First-In First Out Method

Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 20 5,000 250 20 5,000
1,000 24 24,000
26-Dec 250 20 5,000
250 24 6,000 750 24 18,000

Accounting for Factory Overhead 43

 Cost Flow

First-In First Out Method

Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 20 5,000 250 20 5,000
1,000 24 24,000
26-Dec 250 20 5,000
250 24 6,000 750 24 18,000
28-Dec 500 26 13,000

Accounting for Factory Overhead 44

 Cost Flow

First-In First Out Method

Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 20 5,000 250 20 5,000
1,000 24 24,000
26-Dec 250 20 5,000
250 24 6,000 750 24 18,000
28-Dec 500 26 13,000 750 24 18,000
500 26 13,000

Accounting for Factory Overhead 45

 Cost Flow

First-In First Out Method

Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 20 5,000 250 20 5,000
1,000 24 24,000
26-Dec 250 20 5,000
250 24 6,000 750 24 18,000
28-Dec 500 26 13,000 750 24 18,000
500 26 13,000
30-Dec 500 24 12,000

Accounting for Factory Overhead 46

 Cost Flow

First-In First Out Method

Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 20 5,000 250 20 5,000
1,000 24 24,000
26-Dec 250 20 5,000
250 24 6,000 750 24 18,000
28-Dec 500 26 13,000 750 24 18,000
500 26 13,000
30-Dec 500 24 12,000 250 24 6,000
500 26 13,000

Accounting for Factory Overhead 47

Cost Flow

750 20 15,000

Accounting for Factory Overhead 48

 Cost Flow
First-In First Out Method
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000

Accounting for Factory Overhead 49

 Cost Flow
First-In First Out Method
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000

Accounting for Factory Overhead 50

 Cost Flow
First-In First Out Method
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000

Accounting for Factory Overhead 51

 Cost Flow
First-In First Out Method
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000

Accounting for Factory Overhead 52

 Cost Flow
First-In First Out Method
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000

Accounting for Factory Overhead 53

 Cost Flow
First-In First Out Method
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 24 6,000

Accounting for Factory Overhead 54

 Cost Flow
First-In First Out Method
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 24 6,000 500 20 10,000
750 24 18,000

Accounting for Factory Overhead 55

 Cost Flow
First-In First Out Method
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 24 6,000 500 20 10,000
750 24 18,000
26-Dec 500 24 12,000

Accounting for Factory Overhead 56

 Cost Flow
First-In First Out Method
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 24 6,000 500 20 10,000
750 24 18,000
26-Dec 500 24 12,000 500 20 10,000
250 24 6,000

Accounting for Factory Overhead 57

 Cost Flow
First-In First Out Method
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 24 6,000 500 20 10,000
750 24 18,000
26-Dec 500 24 12,000 500 20 10,000
250 24 6,000
28-Dec 500 26 13,000

Accounting for Factory Overhead 58

 Cost Flow
First-In First Out Method
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 24 6,000 500 20 10,000
750 24 18,000
26-Dec 500 24 12,000 500 20 10,000
250 24 6,000
28-Dec 500 26 13,000 500 20 10,000
250 24 6,000
500 26 13,000

Accounting for Factory Overhead 59

 Cost Flow
First-In First Out Method
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 24 6,000 500 20 10,000
750 24 18,000
26-Dec 500 24 12,000 500 20 10,000
250 24 6,000
28-Dec 500 26 13,000 500 20 10,000
250 24 6,000
500 26 13,000
30-Dec 500 26 13,000

Accounting for Factory Overhead 60

 Cost Flow
First-In First Out Method
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20 20,000
10-Dec 500 20 10,000 500 20 10,000
15-Dec 1,000 24 24,000 500 20 10,000
1,000 24 24,000
20-Dec 250 24 6,000 500 20 10,000
750 24 18,000
26-Dec 500 24 12,000 500 20 10,000
250 24 6,000
28-Dec 500 26 13,000 500 20 10,000
250 24 6,000
500 26 13,000
30-Dec 500 26 13,000 500 20 10,000
250 24 6,000

Accounting for Factory Overhead 61

 Cost Flow

1,000 20.00 20,000

1,000 24.00 24,000
500 26.00 13,000
2,500 22.80 57,000

750 22.80 17,100

Accounting for Factory Overhead 62

 Cost Flow

Moving Average
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20.00 20,000

Accounting for Factory Overhead 63

 Cost Flow

Moving Average
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20.00 20,000
10-Dec 500 20.00 10,000

Accounting for Factory Overhead 64

 Cost Flow

Moving Average
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20.00 20,000
10-Dec 500 20.00 10,000 500 20.00 10,000

Accounting for Factory Overhead 65

 Cost Flow

Moving Average
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20.00 20,000
10-Dec 500 20.00 10,000 500 20.00 10,000
15-Dec 1,000 24 24,000

Accounting for Factory Overhead 66

 Cost Flow

Moving Average
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20.00 20,000
10-Dec 500 20.00 10,000 500 20.00 10,000
15-Dec 1,000 24 24,000 1,500 22.67 34,000

Accounting for Factory Overhead 67

 Cost Flow

Moving Average
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20.00 20,000
10-Dec 500 20.00 10,000 500 20.00 10,000
15-Dec 1,000 24 24,000 1,500 22.67 34,000
20-Dec 250 22.67 5,667 1,250 22.67 28,333

Accounting for Factory Overhead 68

 Cost Flow

Moving Average
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20.00 20,000
10-Dec 500 20.00 10,000 500 20.00 10,000
15-Dec 1,000 24 24,000 1,500 22.67 34,000
20-Dec 250 22.67 5,667 1,250 22.67 28,333
26-Dec 500 22.67 11,333 750 22.67 17,000

Accounting for Factory Overhead 69

 Cost Flow

Moving Average
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20.00 20,000
10-Dec 500 20.00 10,000 500 20.00 10,000
15-Dec 1,000 24 24,000 1,500 22.67 34,000
20-Dec 250 22.67 5,667 1,250 22.67 28,333
26-Dec 500 22.67 11,333 750 22.67 17,000
28-Dec 500 26 13,000

Accounting for Factory Overhead 70

 Cost Flow

Moving Average
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20.00 20,000
10-Dec 500 20.00 10,000 500 20.00 10,000
15-Dec 1,000 24 24,000 1,500 22.67 34,000
20-Dec 250 22.67 5,667 1,250 22.67 28,333
26-Dec 500 22.67 11,333 750 22.67 17,000
28-Dec 500 26 13,000 1,250 24.00 30,000

Accounting for Factory Overhead 71

 Cost Flow

Moving Average
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20.00 20,000
10-Dec 500 20.00 10,000 500 20.00 10,000
15-Dec 1,000 24 24,000 1,500 22.67 34,000
20-Dec 250 22.67 5,667 1,250 22.67 28,333
26-Dec 500 22.67 11,333 750 22.67 17,000
28-Dec 500 26 13,000 1,250 24.00 30,000
30-Dec 500 24.00 12,000

Accounting for Factory Overhead 72

 Cost Flow

Moving Average
Received Issued Balance
Unit Unit Unit
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount
1-Dec 1,000 20.00 20,000
10-Dec 500 20.00 10,000 500 20.00 10,000
15-Dec 1,000 24 24,000 1,500 22.67 34,000
20-Dec 250 22.67 5,667 1,250 22.67 28,333
26-Dec 500 22.67 11,333 750 22.67 17,000
28-Dec 500 26 13,000 1,250 24.00 30,000
30-Dec 500 24.00 12,000 750 24.00 18,000

Accounting for Factory Overhead 73

Get in Touch
With Us
Send us a message or
visit us
City of Batac, Ilocos Norte,
Philippines
(63) 77-600-0459
op@mmsu.edu.ph

Follow us for updates

facebook.com/MMSUofficial
www.mmsu.edu.ph