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Dear Mr Moffat,
In questions b and d of example 1, we less the opening inventory and add the closing inventory. Can you please eplain to me why we are doing these? Also, what do we mean by opening and closing inventory. Thank you in advance.You should be aware of what is meant by opening and closing inventories from Paper F3 (or whatever exempted you from F3). Inventory is the current word for stock.
So opening inventory is the stock held at the start of the period, and closing inventory is the stock held at the end of the period.Suppose I have 100 units in inventory at the start of the period, and I produce 1000 units during the period – so I then have 1100 units available to sell. But suppose I only sold 900 of the units. That would mean that I would have 200 units left at the end of the period.
So……..sales units = opening inventory + production – closing inventory.
In this example, we know the sales and the opening and closing inventories. So we can calculate the production.(I do hope that you are watching the free lectures that go with the lecture notes – it is not sufficient to use the notes on their own (they are not study texts) because it is in the lectures that we explain and expand on the examples)
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