Cost & Management

Accounting

Material
Lecture-7
Mian Ahmad Farhan (ACA)
 Inventory Maintenance System

Perpetual Inventory System

Continuous record for each inventory item.

 Inventory Maintenance System

Periodic inventory System or Physical system

Does not keep a continuous record of inventory on

hand.
 Entries

Perpetual System Periodic System

At credit purchase At credit purchase

Inventory Purchases
Accounts payable Accounts payable

At credit sales
At credit sales
Accounts receivable
a- Accounts receivable
Sales revenue
Sales revenue

b- COGS
Inventory
 Entries

End of the period entries

End of the period entries
a- Profit & Loss
No entry will be recorded at
Beginning inventory
the end of period
b- Ending inventory
Profit & Loss
Problem

Date Units Total

1 Jan 100 @ 10 Rs. 1000
15 Jan 100 @ 12 1200
200 units Rs.2200

Average Price = 2200 / 200 = Rs.11 per unit

Problem

Unit sold 150

Whether remaining units are:

50 @ 10 = 500
50 @ 12 = 600
50 @ 11 = 550
Inventory Costing

FIFO First In First Out

LIFO Last In First Out

W.Avg. Weighted Average

Problem

Date Units Total

1 Jan 100 @ 10 Rs. 1000
15 Jan 100 @ 12 1200
200 units Rs.2200

Average Price = Total Cost / Total units

Average Price = 2200 / 200 = Rs.11 per unit

 Problem Perpetual System

James & company is a manufacturing concern. Following is the receipts

& issues record for the month of January, 2002

Date Receipts Issues

Jan 1 Opening Balance 50 @ 40

Jan 8 200 units @ Rs. 50/unit
Jan 11 60 units
Jan 13 150 units @ Rs. 60/unit
Jan 18 100 units @ Rs. 75/unit
Jan 20 150 units
Prepare Inventory sheets under:
 FIFO Method
 LIFO Method
 Average cost Method