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Hi sir…
I had posted this same question the other day but somehow the topic was closed before I could fully clarify.
Here goes again..!
A business has opening inventory of $15000 at the start of an accounting period and closing inventory of $18500 at the end of the accounting period.
Which of the following trial balance extracts correctly shows how the opening and closing inventory will be recorded in the general ledger?
Option A
Dr Closing inventory 15000
Cr Opening inventory 18500Option B
Dr Opening inventory 15000
Cr Closing inventory 18500Option C
Dr Opening inventory 15000
Dr Closing inventory – SFP 18500
Cr Closing inventory – SPLOCI 18500Option D
Dr Closing inventory – SFP 18500
Cr Opening inventory 15000
Cr Closing inventory – SPLOCI 18500I found this qn on ACCA Study Hub.
The provided answer is Option C
Their explanation is as follows:
Opening inventory is a debit balance that is charged to cost of sales as an expense.
Closing inventory is included twice as a debit and credit to reflect that it is included in the statement of profit or loss and other comprehensive income and the statement of financial position.
The adjustments for inventory from your lectures are clear. But I still don’t fully understand what the original question that I posted is asking for.
Or is it simply a wording error?
Could you kindly clarify sir…
I am afraid that I don’t really understand it either.
The opening inventory appears on the TB at the end of the year as a debit balance, and then we make the year end adjustments to remove the opening inventory and create the closing inventory. So neither the question nor the answer make much sense.
I am away from the country at the moment but I will check the Study Hub when I get home on Wednesday and sort out what it is they are doing (or whether they are simply wrong 🙂 )
Thanks for reminding me 🙂
It remains a very odd question (and I have reported it – this is the first edition of the ACCA Study Text and there are one or two odd things need correcting).
The opening balance will be a debit balance and will appear on the trial balance as a debit (the trial balance is prepared before the year end adjustment).
The adjustments after the trial balance has been prepared will be to Credit the inventory with the opening balance and Debit the SOPL, and then to Debit inventory with the closing inventory (to appear in the SOFP) and Credit the SOPL.
The question really relates to something called the extended trial balance which used to be examined years ago but it no longer examinable. The question should not therefore be included in the study text.
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