Tag Archives | Inventory

4 Main Inventory Systems | Cost Accounting

The following points highlight the four main inventory systems. The systems are: 1. Perpetual Inventory System 2. Continuous Stock Taking System 3. Periodic Stock Taking System 4. Two Bin System. 1. Perpetual Inventory System: CIMA defines perpetual inventory system as “the recording as they occur of receipts, issues and the resulting balances of individual items […]

Stock Discrepancies: Reasons and Steps to Avoid | Accounting

In this article we will discuss about:- 1. Reasons for Stock Discrepancies 2. Steps to Avoid Stock Discrepancies 3. Accounting Procedure. Reasons for Stock Discrepancies: The possible reasons for discrepancy between physical stock and stock shown in records may be due to the following: (a) Shortage of material due to spoilage, evaporation, wastage in material […]

Inventory: Definition and Features | Accounting

In this article we will discuss about the definition and features of inventory. Definition of Inventory: ICAI has defined inventory as “tangible property held (i) for sale in the ordinary course of business or (ii) in the process of production for sale or (iii) for consumption in the production of goods or service for sale, […]

Top 2 Inventory Control Ratio’s | Cost Accounting

The following points highlight the top two inventory control ratio’s. They are: 1. Input-Output Ratio 2. Stock Turnover Ratio. 1. Input-Output Ratio: Input-output ratio is used in material control, which indicates the relation between the quantity of material used in the production and the quantity of final output. Advantages: The advantages of analysis of input-output […]

Various Inventory Control Techniques

Economic Order Quantity: The prime objective of inventory management is to find out and maintain optimum level of investment in inventory to minimize the total costs associated with it. The economic order quantity (EOQ) is the optimum size of the order for a particular item of inventory calculated at a point where the total inventory […]

As-2 on Inventory Valuation

AS-2 has advocated to value inventories at the lower of historical cost and net realisable value. It comments: “Inventories are held in the expectation of deriving revenue directly or indirectly from their sale or use. In order to determine the results of a business for a given period, it is necessary to carry forward the […]

Methods of Inventory Pricing

The following points highlight the generally accepted methods of inventory pricing, each based on a different Assumption of cost flow. 1. Cost Price Methods: (i) First-In, First-Out (FIFO): The FIFO method follows the principle that materials received first are issued first. After the first lot or batch of materials purchased is exhausted, the next lot […]

Lower of Cost or Market (LCM) Rule (With Criticism)

In this article we will discuss about Lower of Cost or Market (LCM) Rule:- 1. Subject Matter of Lower of Cost or Market (LCM) Rule 2. Arguments in Support of LCM Rule 3. Criticism. Subject Matter of Lower of Cost or Market (LCM) Rule: The different methods of inventory costing such as FIFO, LIFO determine […]

Inventory: Meaning, Need and Objectives

In this article we will discuss about Inventory:- 1. Meaning of Inventory 2. Need for Inventories 3. Objectives for Measurement 4. Methods of Costing 5. Consistency in the Valuation 6. Accounting 7. Consequences of the Choice of Inventory Methods. Contents: Meaning of Inventory Need for Inventories Objectives for Measurement of Inventories Methods of Inventory Costing […]

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