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Inventory – ACCA Audit and Assurance (AA)

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    • NO – the “goods received not invoiced” accrual takes account of the timing difference between the receipt of goods recorded in closing inventory (i.e. before the y/e) and corresponding purchase invoice. A sale after the y/e is next year’s revenue – a purchase of goods after the y/e is next year’s purchase – neither relate to the current accounting period. Please remember to ask questions in the ask the tutor AA forum – not here, which is a space only for comments or queries on the lecture itself.

  2. Hi Sir,

    Just to clarify, at ‘6:48 mins’ you stated an example, so in layman’s language did you mean that “Stock-take should be done only once and that too carefully in order to avoid duplication of efforts, work and costs, as there there will be no magic the second time you go there to stock-take the same inventory?”

    Kind Regards
    Antriksh Kaul

    • Management only gets “one shot” at a year-end stocktake – if they don’t get it right “on the day” quantities will move on – goods will be purchased and sold (business activities cannot be held up indefinitely to facilitate stock taking).

  3. Hi sir,
    Could you clarify, you say closing inventory overstated by 90,000 therby profit also overstated.
    If reported profit is 30,000 how does the value turn to -60,000.
    Shouldn’t it be 120,000?

    Thank you

    • Cos = Opening inventory + purchases – closing inventory
      If closing inventory is overstated by $x, Cos is understated by $x and hence profit is overstated by $x.
      So if $s is $90k and profit is $30k, profit becomes a $60k loss ($30k – $90k) after correction.

  4. Sir, is there anything wrong in the following sentences which I copied here from the last sentence of Audit of Inventory chapter, page 91

    If something is regarded as
    having been sold it should be counted as enclosing inventory if it is not regarded as having
    been sold at yearend, it should be enclosing inventory.

    • Yes, it’s rubbish! Should say:

      If something is regarded as having been sold at year-end it should not be counted in closing inventory; if it is not regarded as having been sold at year-end, it should be in closing inventory.

      Thanks for pointing it out. We will correct it shortly.

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