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Inventory

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Inventory

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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    Posts
  • December 16, 2021 at 5:38 am #644379
    ikmughal28
    Member
    • Topics: 65
    • Replies: 62
    • ☆☆

    Hi

    need to ask that if the inventory is damaged and cannot be sold and required to be written off,
    then where in the SOPL this will be shown and what will be the journal entry for the write off?

    Thanks

    December 16, 2021 at 7:33 am #644387
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51582
    • ☆☆☆☆☆

    If inventory is written off, then if we show just the value of the inventory remaining in the trading account (where we calculate the gross profit) then it makes it look as though the gross profit % on the goods actually sold is lower than it really is.

    To avoid this, we should credit the inventory in the trading account with the cost of the inventory written off, and then debit the expense of the inventory written off along with other expenses below the gross profit figure.

    The final net profit is not affected, but it is better presentation for the reason I explained in my first paragraph.

    (I do actually explain this in my free lectures)

    December 16, 2021 at 11:24 am #644397
    ikmughal28
    Member
    • Topics: 65
    • Replies: 62
    • ☆☆

    Thanks

    December 16, 2021 at 3:53 pm #644421
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51582
    • ☆☆☆☆☆

    You are welcome 🙂

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