Inventory and IAS 2 Examples 1-3 – ACCA Financial Accounting (FA) lectures
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Dear John, thank you for an amazing lecture. My question is the following. If we only record closing and opening inventory, how than the business keeps track of payables ?
By recording all purchases on credit and all cash paid to suppliers (as shown in an earlier lecture on double entry bookkeeping).
did you expect some of this (around 15:56) to be edited out??
Great!! very clear
sir i’m really grateful for all your lectures and replies. A quick question. when we are asked to calculate gross profit for the year where will carriage inward and carriage outward falls? secondly, under what circumstances the rent expenses be included in the cost of sales? i thought rent expenses are always deducted from gross profit to calculate profit before tax. thanks
Both of these questions are dealt with in later lectures – I obviously cannot explain everything all at once 馃檪
Carriage inwards is included in cost of sales. Carriage outwards is a deliver expense and is not included in cost of sales.
For a manufacturing company, then rent of the factory is included in the cost of sales and therefore affects the gross profit. Rent of offices etc. is deducted from gross profit.
Thank you so much.
You are welcome 馃檪
Why we need to add remaining inventory by profit loss statement?
Hello Sir,
I need to ask that, I’ve read in BPP book about the Counting Inventories, in the Continuous Inventory record maintaining, the inventories with different kinds which are on hand / remaining after issuing / sales on daily basis from stores will be counted on daily basis ?
Thankyou very much sir, other tutors dont even explain the role of Book keeper and Accountant, the way you explain in an amazing story mode. They just explain to you – do this, do that, without the logic behind it.
Sir one question – do Book keepers also enter into the SOPL Account at the beginning – like closing off the Purchase and Sales Account, with the Accountant entering adjustments at the end – like Inventory , into the SOPL ?
Or only the Accountant plays with the SOPL Account, and does all the closing off the accounts jobs. ?
If the latter is the case, then why not just debit the Inventory and credit the Purchase account, instead of crediting with SOPL ? Then SOPL would look cleaner.
But ofcourse, if the former is the case, then the logic makes absolute sense – correcting the Book Keeper flaws.
God bless.
There is no strict rule about who does what, but the accounting part of it is doing the year end adjustments and closing off the accounts.
It is perfectly acceptable to debit inventory and credit purchases – there are no accounting standards relating to the individual entries.
Thanks!
You are welcome.
I work at a warehouse as a associate,
we manually count our inventory every week ,
and even though we ave counted shousand times,
there are always something missing ,
funny hahahaha.
Thank you very much professor for so clear and ablolutly understandbly leckchures
Thank you for your comment 馃檪
can you please explain why you dont even use cost of sale ledger account? thanks
You have a gift for simplifying things. Good lecture. Well done.
Thank you for your comment 馃檪
For example 3, how come we don’t use a separate cost of sales account and only use the Statement of Profit and Loss (SOPL) account?
the balance carried forward from a cost of sales account should equal open inv + purchases – closing inv right?
thank you.
Also, since we are assuming that opening inventory is all sold in the current period, does it mean that the opening inventory becomes part of the cost of sales?