Professional Documents
Culture Documents
CHAPTER 2
RECORDING TRANSACTIONS AND
EVENTS
CONTENT
2.1 Inventory
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OVERVIEW
Inventory
Valuation Adjustment
Definition
According to IAS02, Examples:
Inventories are assets:
• Held for sale in the ► Goods purchased and held for resale
ordinary course of
► Finished goods produced
business
• In the process of ► Work in progress (WIP) being
production for such sale
• In the form of materials or produced
supplies to be consumed
► Materials and supplies awaiting use
in the production process
or in the rendering of in the production process (raw
services
materials)
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Inventory Records
Two methods
Measurement
Lower of cost and Net realizable value (NRV)
Impor Other
Purchase directly Trade
Purchase t
price attributable discounts
cost duties
cost
Inventory
measurement Other cost bringing the inventories to their
present location and condition
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Two methods
Format
$
Opening inventory value x
Add cost of purchases (or, in the case of a x
manufacturing company, the cost of production)
x
Less closing inventory value (x)
Cost of goods sold x
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Summary
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Revision
QUESTION 1 The financial year of Mitex Co ended on 31 December 20X1. An inventory count on
January 4 20X2 gave a total inventory value of $527,300. The following transactions occurred
between January 1 and January 4.
$
Purchases of goods 7,900
Sales of goods (gross profit margin 40% on sales) 15,000
Goods returned to a supplier 800
What inventory value should be included in Mitex Co’s financial statements at 31 December 20X1?
A. $525,400 B. $527,600 C. $529,200 D. $535,200
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Revision
QUESTION 2 A firm has the following transactions with its product R.
The firm uses FIFO to value its inventory. What is the inventory value at the end of the year?
A. $Nil B. $2,200 C. $1,900 D. $1,807.2
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QUESTION 3 The closing inventory at cost of a company at 31 January 20X3 amounted to $284,700. The
following items were included at cost in the total:
1. 400 coats, which had cost $80 each and normally sold for $150 each. Owing to a defect in manufacture,
they were all sold after the reporting date at 50% of their normal price. Selling expenses amounted to 5% of
the proceeds.
2. 800 skirts, which had cost $20 each. These too were found to be defective. Remedial work in February
20X3 cost $5 per skirt, and selling expenses for the batch totalled $800. They were sold for $28 each.
What should the inventory value be according to IAS 2 Inventories after considering the above items?
A. $281,200 B. $282,800 C. $329,200 D. None of these
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Tangible non- current assets Tài sản dài hạn hữu hình
Capital expenditure Chi phí vốn hóa
Revenue expenditure Chi phí hoạt động
Cost Nguyên giá
Depreciation Khấu hao TSCĐ hữu hình
Disposals Thanh lý
Residual value Giá trị thanh lý
Accumulated depreciation Khấu hao lũy kế
Straight line method Phương pháp đường thẳng
The reducing balance method PP số dư giảm dần
Fair value Giá trị hợp lý
Carrying amount Giá trị còn lại
Useful life Thời gian sử dụng hữu ích
Initial Measurement Ghi nhận ban đầu
Overhead costs Chi phí chung
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Overview
Non- current
assets
Use within
Purchase Disposal
business
Depreciation
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Distinguish between
current assets and non- current assets
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- Consumed in normal
Intended to be used operating cycle
on a continuing basis - or sold, held
primarily for trading
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Revenue expenditure
Capital expenditure
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Capital Income
Revenue Income
Income derived from the following
sources.
► (a) The sale of trading assets, such as
goods held in inventory
► (b) The provision of services
► (c) Interest and dividends received from
investments held by the business
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Initial
measurement
Purchase price excluding any trade
discount and sales tax
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Depreciation
- Depreciation is: the systematic allocation of the depreciable amount of
an asset over its useful life.
Dr Depreciation expense
Double entry
Cr Accumulated depreciation
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Depreciation
methods
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Depreciation methods
Reducing
balance Depreciation charge = X % × carrying amount
method
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QUESTION
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SOLUTION
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Depreciation methods
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Record the
proceeds
Dr Cash account
Remove acccumulated
depreciation Cr Disposals
account
Remove the cost of Dr Acccumulated
non-current asset depreciation account
Dr Disposal account Cr Disposals account
Cr Non-current
asset Cost account
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Overview
Accruals concept
Expenditure Income
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Accruals
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Prepayments
DR Assets
Prepayments are included in receivables
in current assets in the statement of CR Expenses
financial position.
They are assets, as they represent money
that has been paid out in advance of the
expense being incurred.
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Prepaid income
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OVERVIEW
Trade
receivables
Irrecoverable Allowances
debts
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Irrecoverable
debts
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Subsequently paid
DEBIT Cash account (SOFP)
CREDIT Irrecoverable debts expense (SOPL)
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QUESTION
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Doubtful debts
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► It is offset against trade receivables, which are shown at the net amount.
Accounting treatment
► When an allowance is first made
DEBIT Irrecoverable debts expenses (SPL)
CREDIT Allowances for receivables (SFP)
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