Cost Formulas

• Specific identification – used for items that

are not ordinarily interchangeable and those
that are segregated for specific projects.
• Weighted average cost – used for large
numbers of items of inventory that are
ordinarily interchangeable. This shall be
applied under a perpetual inventory system.

GOVT ACCTG & ACCTG FOR NPOs by: Z.B.Millan

 Journal entries – Initial recognition
Inventory Held for Sale Inventory Held for Distribution

Merchandise Inventory xxx Welfare Goods for Distribution xxx

Accounts Payable xxx Accounts Payable xxx

Inventory Held for Inventory Held for

Manufacturing Consumption
Raw Materials Inventory xxx Office Supplies Inventory xxx
Accounts Payable xxx Accounts Payable xxx

Semi-Expandable Property  
Semi-Expendable Machinery xxx
Accounts Payable xxx  

GOVT ACCTG & ACCTG FOR NPOs by: Z.B.Millan

 Recognition as an Expense
The carrying amount of an inventory is
recognized as expense in the period it is:
a. Sold;
b. Distributed;
c. Exchanged;
d. Consumed; or
e. Written down to its NRV or Current
replacement cost (only the portion of the
carrying amount in excess of the NRV or CRC
is recognized as expense).

GOVT ACCTG & ACCTG FOR NPOs by: Z.B.Millan

 Receipt and Disposition of Inventories
• Requisition
1. End users prepare the Purchase Request (PR)
form.

2. Purchasing Unit prepares the Purchase Order

(PO).

(Note: A canvass from at least 3 suppliers is

required for purchases amounting to ₱1,000 and
above.)

GOVT ACCTG & ACCTG FOR NPOs by: Z.B.Millan

 Receipt and Disposition of Inventories
• Receipt
3. Property/Supply Division prepares the Inspection and
Acceptance Report (IAR) and forwards it to the Property
Inspector.
4. Property Inspector inspects the delivered items and fills
up the IAR.
5. The Property/Supply Division records accepted deliveries
in the Stock Card (SC).
6. The Accounting Division records accepted deliveries in
the books of accounts and in the Supplies Ledger Card
(SLC).
7. The Property/Supply Division prepares the
Disbursement Voucher (DV) then forwards it, together
with the supporting documents, to the Accounting
Division for processing of payment.
GOVT ACCTG & ACCTG FOR NPOs by: Z.B.Millan