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There is an adjustment i don’t understand.
The closing inventory was Rs101375 as at 31 December 2018.However part of the inventory amounting to rs23750 at cost was sold for rs18425 in January 2019. (NOTE:The year end of the company is 31 December 2018.)
Inventory in the profit and loss should be reduced by rs23750
Then the loss made of rs5325 should be treated as an expense.
There is no need to record rs18425 in current assets as cash as the cash was received in 2019 after the year ends.Is this like to treat this adjustment?
No, this is not correct.
The inventory should be valued at the lower of cost and NRV.
Therefore the items that cost 23,750 should instead be valued at 18,425.
Therefore the correct value for inventory as at 31 December 2018 is 101,375 less 23,750 plus 18,425.
This is all explained in my free lectures on inventory.
The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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