Inventory and IAS 2 Valuation of Inventory – Example 5 – ACCA Financial Accounting (FA) lectures

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1. mohsin17222 says

   November 2, 2020 at 9:15 pm

   Hello John,

   I need to ask that suppose if we have 500 closing inventory in which 300 bought at 28th Oct $15 each and 200 bought at 30th Oct $14 each. When we get the most recent inventory cost, don’t you think that due to valuing inventory at low cost the balance sheet will be gone understated and the due to not take actual prices may be SPL makes low profit?

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2. tkhue3296 says

   September 10, 2020 at 3:08 pm

   Cleared ,
   Thanks Sir .

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3. hilamu says

   February 1, 2020 at 10:48 am

   Hello sir
   Is it possible using the same method in solving FIFO and AVCO question that we have learnt in MA in solving FA, FIFO and AVCO question and being correct?

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   • nkasiobi says

     February 11, 2020 at 9:52 am

     Hi Hilamu,
     The FIFO & AVCO methods are the same whether in FA or MA. I’m not sure there is any difference as long as you get the answer right.

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4. anya88 says

   October 30, 2019 at 6:56 pm

   Hi John,

   Just a quick question regarding FIFO as I do not undarstand why units bought on the 25th & 20th November have been used rather than the ones bought first i.e on the 10th & 20th of November.

   Can you please advise?

   Many thanks

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   • maxcw says

     November 3, 2019 at 12:20 pm

     Hi Anya,

     Since the assumption is that those purchased first are also sold first, the remaining units in inventory will always be the most recently purchased, i.e. units will be valued at the cost of the latest purchase/s since these will be the unsold units.

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     • anya88 says

       November 16, 2019 at 1:05 pm

       Hi Maxcw,

       I thought that FIFO means first in first out and units purchased first i.e on the 10th November will be sold first but it seems that in the above exapmle units last bought i.e 25th November were sold first but this method is called LIFO as far as I remember.

     • maxcw says

       November 16, 2019 at 7:49 pm

       Hi Anya,

       FIFO does mean first in, first out. So when an order is received and units are sold, the ‘first in’ are sold, leaving the ‘last in’ in inventory. Remember the purpose of the exercise is to value inventory remaining, not the units sold.

       Since the ‘last in’ are not being sold, they are valued as the remaining inventory.

5. Camille says

   January 21, 2019 at 3:28 pm

   Hi sir,

   There is an error at the end of the calculation. 600 – 100 is 500 and the $8,686 is divided by the 500.

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