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Ordering and accounting for inventory – ACCA Management Accounting (MA)

VIVA

Reader Interactions

Comments

  1. ngovyqsq1708 says

    November 18, 2024 at 3:46 pm

    why ias2 do not accept LIFO?

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    • John Moffat says

      November 18, 2024 at 4:46 pm

      It can distort the financial statements. For example in the SOFP it shows outdated inventory values.

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  2. Aireeedee says

    November 16, 2024 at 11:44 am

    Thank you so much for these lectures! You explain everything so clearly.
    I was so confused until I found these.

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    • John Moffat says

      November 16, 2024 at 3:46 pm

      Thank you for your comment πŸ™‚

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  3. Jith says

    October 2, 2024 at 11:13 pm

    Purchases & OP Inv:(20 + 140 +100) = 260
    Sales: ( 80 + 140) = 220
    Closing Inventory: 260 – 220 = 40

    LIFO Valuation: (20 x $4.00) + (20 x $4.40) = $168.

    how it comes ???
    can u explain it …pls

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    • o1lim says

      October 20, 2024 at 7:59 am

      Hi Jith,

      My assumption is that you believe the LIFO should be valued at (40 x $4.60). However, this method is incorrect as LIFO takes into account the timing of sales; for example, when you first sell your goods on 12 November, you are already using LIFO then. This means that, as John said in the video, the cost of sales will be valued at (80 x $ 4.40).

      If the sales end on 12th November (i.e no more sales after 12th November), the method which you use is correct (similar to FIFO, where you find total purchases & OP inv, deducted by the sales. Only difference is you use the cost of the most recently purchased goods for the cost of sales. This means that the method (the one similar to calculation of FIFO can be used since timing is not taken into account) can be used. Similarly, if there are only 2 changes (R for receipt, I for issues. RRRRII or RRIII), the method should also be correct. However, when it comes to RRRIIIRR or RIIIRR, where it switches back from R to I to R again, timing matters and hence you have to calculate the LIFO valuation step by step, and not like FIFO.

      I feel that this misconception is also analogous to the cumulative weighted average cost and periodic weighted average cost. You can search it up if it helps to clear up your misunderstanding. This is also explained in the FA exam in John’s videos.

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  4. Parris28 says

    October 10, 2023 at 7:42 pm

    Thank you Mr Moffat. You’re literally the only person I have come across who has helped me FINALLY understand this and I’ve gone through multiple sources looking for help. Great at explaining and made it extremely easy to comprehend. Thank you so much!

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    • John Moffat says

      October 11, 2023 at 8:32 am

      Thank you for your comment πŸ™‚

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  5. optnuser says

    July 6, 2023 at 11:38 pm

    Am I provided by calculator and paper-list for notes in cbe exam

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  6. L.Thenuka says

    April 23, 2023 at 5:48 pm

    Dear John,
    For LIFO, since they are accounted on the year end and not perpetually,
    Is the below method; a valid approach of arriving at the answer?

    Purchases & OP Inv:(20 + 140 +100) = 260
    Sales: ( 80 + 140) = 220
    Closing Inventory: 260 – 220 = 40

    LIFO Valuation: (20 x $4.00) + (20 x $4.40) = $168.

    Please Advice,
    Thank You!

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    • Jith says

      October 2, 2024 at 11:11 pm

      brother how you divide 40 into 20 each and the values 4&4.40……i didnt understand….is there any equation for finding this easy way….till 260 minus 220=40 i understood….but afterwards can you explain it

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  7. Salexy says

    October 11, 2022 at 10:01 am

    Very simple and understood. Thanks Mr. Moffat…Your lectures are quite easy.

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  8. joe123456 says

    March 13, 2022 at 4:01 pm

    Woooooowwww I am at y third year University and had never understood these methods of stock valuation but today I have. Thanks to open tuition

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    • John Moffat says

      March 13, 2022 at 4:50 pm

      Great πŸ™‚ πŸ™‚

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  9. jvowles says

    January 12, 2022 at 1:38 pm

    Hi with the LIFO example, 12th Nov- ‘Sold 80 Units’ why is it that:
    You’ve written down, sold 60*Β£4.40 + 20*Β£4.00.

    The last most recent purchases was from the 140 units, so why is it not:
    80*Β£4.40

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    • jvowles says

      January 12, 2022 at 1:48 pm

      Ignore me, I think its the way that you’ve done your calculations that’s confused me.

      Many thanks

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      • John Moffat says

        January 12, 2022 at 3:42 pm

        OK πŸ™‚

      • camillenguyen says

        May 19, 2024 at 6:22 am

        I don’t get it. I have the same questions.

  10. sintayehubirkneh says

    December 15, 2021 at 8:14 pm

    well Explained

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  11. Standelous says

    October 26, 2021 at 4:51 pm

    Beautiful! Well simplified and understandable.
    Thank you Sir

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    • John Moffat says

      October 27, 2021 at 7:41 am

      Thank you for your comment πŸ™‚

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  12. AZowi says

    February 3, 2021 at 7:53 am

    Thank you so much Mr. Moffat the lecture was so beneficial.

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    • John Moffat says

      February 3, 2021 at 8:53 am

      You are welcome πŸ™‚

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  13. Asif110 says

    November 20, 2020 at 4:24 pm

    Sir for LIFO, since they are accounted on the year end, and not perpetually like Avg, can we not just do:
    20 + 140 + 100 – 80 – 140 = 40
    (20 x 4) + (20 x 4.4) = 168.

    Simple calculation of quantity like FIFO, then take cost from old stock instead of new stock for LIFO reasons.

    β€”β€”β€”β€”

    Sir for Avg cost, can we simply do:
    20 + 140 + 100 – 80 – 140 = 40

    (4 + 4.4 / 2) = 4.2
    (4.2 + 4.6 / 2) = 4.4

    40 x 4.4 = 176

    Your answer was around 180.

    Is this method good enough ? Is this small difference of value an issue ?

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    • SarahHaytasingh says

      September 8, 2021 at 7:20 pm

      I want to know the same!! I’m so confused

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  14. Asif110 says

    September 17, 2020 at 12:25 pm

    Well simplified lecture, sir ! And really a funny adorable comment for shopping in the Supermarket – LIFO style , made me laugh off loud.

    Sir, if you may, shall you be covering about periodic weighted avg later on? I saw it briefly mentioned alongside Weighted Avg, in my Tuition Notes of the Institute I go to. Or it won’t appear in the Exams and we don’t need to know.

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  15. LaVendah says

    April 30, 2020 at 1:46 am

    Thank you very much for the class Sir. It was beautiful and understandable.

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    • John Moffat says

      April 30, 2020 at 8:52 am

      Thank you for your comment πŸ™‚

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  16. DhirajACCA says

    April 4, 2020 at 6:11 pm

    A thoroughly enjoyable lecture indeed ! Thank you so much Mr.Moffat.

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    • John Moffat says

      April 4, 2020 at 7:04 pm

      Thank you for your comment πŸ™‚

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  17. ha12 says

    November 21, 2019 at 7:20 am

    Is there not periodic weighted avg. method in f2?

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  18. safashaikh19 says

    October 7, 2019 at 6:52 pm

    sir, i don’t understand how we 40*4.49 instead of 140*4.49 in example 3 (Weighted average cost. The last issue). in the lecture it says its because we sold 100 units. so why didnt we apply that in the previous issue?

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    • safashaikh19 says

      October 7, 2019 at 8:05 pm

      sorry i realised my mistake. i had forgotten the role of the units currently in store i.e 180!!Thanks anyways!

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      • John Moffat says

        October 8, 2019 at 7:05 am

        You are welcome πŸ™‚

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