IAS 2 Inventory
Cost of Inventory-Products for manufacturing company Cost of Inventory for manufacturing company The examples of manufacturing company are as follows. Company manufactures and sells phones, computers, scanners, LDC Company manufactures and sells cars, motor Company manufactures and sells furniture Company manufactures and sells TV Cost of finished goods = cost of material + conversion cost Cost of material = purchase
Continue reading Cost of Inventory- Merchandise/Goods Cost of Inventory for merchandising company The examples of merchandising company are as follows. Company purchases and sells phones, computers, scanners, LDC Company purchases and sells cars, motor Company purchases and sells furniture Company purchases and sells TV Cost of inventory = purchase price-trade discount-sale return and allowance+ freight + insurance + import taxation + Specific
Continue reading Methods of Calculating the Cost of Inventory We will explain three main methods of calculating cost of inventory: specific cost, FIFO (First in, First out) and AVCO (average cost). Specific cost: When items of inventory are individually distinguishable and of high value, so we will use unit cost (actual cost or specific cost). FIFO or AVCO (average cost) : Where
Continue reading IAS 2 Inventory Scope The following items are excluded from the scope of the standard. •Work in progress under construction contracts (covered by IAS 11 Construction contracts) •Financial instruments (ie shares, bonds) •Biological assets Definitions Inventories are assets: – Held for sale in the ordinary course of business; – In the process of production for such sale; or – In
Continue reading I. VALUATION OF INVENTORY Inventory may include any of: -Finished goods -Work in progress -Material The prudence concept requires that profit are not anticipated, but losses are accounted for as soon as they are known. For this reason, IAS2 Inventories states that inventory is valued in the statement of financial position at the lower of cost and net realisable value
Continue reading IAS 2 INVENTORY (F3) LEARNING OBJECTIVE I.INVENTORY IN THE FINANCIAL STATEMENTS II.YEAR-END INVNETORY ADJUSTMENTS III.TYPES OF INVENTORY IV.IAS 2 INVENTORIES V.METHODS OF CALCULATING THE COST OF INVENTORY I. INVENTORY IN THE FINANCIAL STATEMENTS $ $ Revenue x Opening Inventory X Purchases X Less: Closing Inventory (x) Cost of Sales/cost of goods sold (x) Gross Profit x At the beginning of
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