GROUP 2

INVENTORIES &
AGRICULTURE
GOVERNME N T AC C OUNTI NG
 THE REPORTERS

MARY ROSE KAYLA SOPHI A MI CH ANDR EI J AYCEELYN

DI AZ PATI O J UB I NAL BATI

 INVENTORIES
INVENTORIES
ARE ASSETS . . .

Held for sale or distribution in the ordinary

course of operations

(finished goods)

 INVENTORIES
INVENTORIES
ARE ASSETS . . .

In the process of production for sale or

distribution

(work in process)

 INVENTORIES
INVENTORIES
ARE ASSETS . . .

In the form of materials or supplies to be

consumed in the production process or
distributed in the rendering of services

(raw materials and supplies)

INVENTORIES OF
A GOVERNMENT

I NVENTORY H E L D FOR
S AL E
I NVENTORY H E L D FOR
DI S TRI BUTI ON
I NVENTORY H E L D FOR
MAN UFACT URI N G
I NVENTORY H E L D FOR
CON SUMPTI ON
S EMI - EXPENDABL E
PR OPERTY
 MEASUREMENT
I NVENTORI ES AR E I N I TIA L L Y ME A SU RE D A T C OS T AND
SUB SEQUEN T MEAS U R ED A S F O L L O WS:

• Goods held for sale

LOWER OF C O S T AN D NE T RE A L IZ A BL E V A L U E.

• Goods held or distribution

N T RE P L A CE ME N T COS T .
- LOWER OF CO S T AN D CU RRE
 COSTS?!
COSTS?!
WHAT IT
WHAT IT
EXCLUDES
COMPRISES
PUR CHASE C OS T, E XC L UDI NG TRA DE
ABN ORMAL AMOUN TS O F
DI S COUNTS , RE BATE , A ND O THER
WAS TED MATE RI AL S , L ABO R,
S I MI L AR DE DUC TI ON S I N P URCHA S E
AND PRODUC TI ON OVE RHEA D;
PR I CE.

S EL LI N G COS TS ; AN D
DI R ECT COSTS I N C URRED I N
BR I NGI NG TH E AS S E T T O I TS
ADMI N I STRATI VE OVE RHEA DS
I NT ENDED L OC ATI ON A ND
CON DI TI ON
EXCEPTIONS:

A. I NVENTORI E S RE C E I V ED FRO M A NO N-EX CH AN GE

TR ANSACTI ON

B. AGRI CULTURAL PRODUCE

F OR T HESE I TEM S , THEI R I N I T I AL ME AS U R E M E N T S ARE D E E ME D TH E I R
COSTS FOR PURP O S ES OF S U B S E Q U E N T ME AS U R E ME N T AT TH E L OWE R
OF COST OR NRV/ C URRE N T R E PL ACE M E N T CO S T.

•Net Realizable Value (NRV) is the estimated selling price less

estimated costs of completion and estimated selling/disposal
costs.

•Current replacement cost is the cost the entity would incur to

acquire the asset on the reporting date.
COST FORMULAS
SPECIFIC
IDENTIFICATION
COS T OF SA L ES = ACT U A L CO STS O F
THE S PECI F I C I T EMS S OL D

ENDI NG I N VEN T O R Y = A CTU A L

COS TS OF T H E S PECI FIC ITE MS O N
HAND.
 COST FORMULAS
WEIGHTED
AVERAGE COST
THI S SHAL L BE AP P L I ED U N DE R T H E P E RPE TUAL I N VE N TORY
SYS TE M
 COST FORMULAS
WEIGHTED
AVERAGE COST
UNDER THIS FORMULA, A NEW WEIGHTED AVERAGE UNIT
COST IS COMPUTED AFTER EVERY PURCHASE. THE
COMPUTED AVERAGE COSTS ARE USED IN DETERMINING THE
COST OF GOODS SOLD AND INVENTORY ON HAND.

COST FORMULAS
WEIGHTED
AVERAGE COST
ACCORDINGLY, THE COST OF SALES AND ENDING
INVENTORY ARE STATED AT AVERAGE COSTS, RATHER
THAN AT THE ACTUAL COSTS OF THE INVENTORIES
SOLD OR ON HAND.

THIS METHOD IS COMMONLY REFERRED TO IN

TRADITIONAL ACCOUNTING BY BUSINESS ENTITIES AS
THE "MOVING AVERAGE" COST FORMULA.

GOVERNMENT ENTITIES SHALL USE THE PERPETUAL INVENTORY SYSTEM.

UNDER THIS SYSTEM, PURCHASE, SALES, AND OTHER TRANSACTIONS
AFFECTING INVENTORY ARE RECORDED IN THE "INVENTORY" AND “COST
OF SALES" ACCOUNTS, AS APPROPRIATE.
 MOREOVER, STOCK CARDS AND STOCK LEDGER ARE MAINTAINED. THESE
ENABLE THE RETRIEVAL OF INFORMATION ON COSTS AND QUANTITIES OF
INVENTORIES SOLD AND ON HAND AT ANY GIVEN POINT OF TIME.

HOWEVER, PURCHASES OF SUPPLIES AND MATERIALS OUT OF THE PETTY

CASH FUND FOR IMMEDIATE USE OR ON EMERGENCY CASES ARE CHARGED
DIRECTLY AS EXPENSE.

 MUST REMEMBER!

MUST REMEMBER!

THE FIFO COST FORMULA AND THE

PERIODIC INVENTORY SYSTEM ARE NOT
USED BY GOVERNMENT ENTITIES.

 RECOGNITION
AS AN EXPENSE
THE CARRYING AMOUNT OF AN INVENTORY IS
RECOGNIZED AS EXPENSE IN THE PERIOD IT IS
SOLD, DISTRIBUTED, EXCHANGED, OR
CONSUMED.

THE WRITE-DOWN OF INVENTORY TO ITS NRV

OR CURRENT REPLACEMENT COST, AS
APPROPRIATE, IS ALSO RECOGNIZED AS
EXPENSE
ILLUSTRATION:
ENTITY A ACQUIRES INVENTORY FOR P1000 ON ACCOUNT.
INVENTORY HELD FOR
INVENTORY HELD FOR SALE
DISTRIBUTION

MERCHANDISE P1000 WELFARE GOODS FOR P1000

INVENTORY DISTRIBUTION
ACCOUNTS PAYABLE P1000 ACCOUNTS PAYABLE
P1000

INVENTORY HELD FOR INVENTORY HELD FOR

MANUFACTURING CONSUMPTION
RAW MATERIALS P1000 OFFICE SUPPLIES P1000
INVENTORY INVENTORY
ACCOUNTS PAYABLE P1000 ACCOUNTS PAYABLE P1000
SEMI-EXPANDABLE
PROPERTY
SEMI-EXPANDABLE
MACHINERY P1000
ACCOUNTS PAYABLE P1000
RECEIPT AND DISPOSITION
OF INVENTORIES RECEIPT

END USERS PREPARE THE PURCHASE

REQUEST (PR) FORM TO REQUEST FOR THE
PURCHASE OF ITEMS NOT AVAILABLE ON
STOCK.
 RECEIPT AND DISPOSITION
OF INVENTORIES RECEIPT

END USERS REFER TO THE INDIVIDUALS

WHO WILL ACTUALLY BE USING THE ITEMS.
 RECEIPT AND DISPOSITION
OF INVENTORIES RECEIPT

AS AN INTERNAL CONTROL, ONLY THE

APPROPRIATE END USERS ARE ALLOWED TO
MAKE PURCHASE REQUESTS FOR THE ITEMS
THEY NEED.
RECEIPT AND DISPOSITION
OF INVENTORIES RECEIPT

THE AUTHORIZED OFFICIAL PREPARES THE

PURCHASE ORDER (PO).

 MUST REMEMBER!
MUST REMEMBER!

THE PO SERVES AS CONTRACT BETWEEN

THE ENTITY AND THE SUPPLIER.

 MUST REMEMBER!
MUST REMEMBER!
WHEN THE PURCHASED ITEMS ARE DELIVERED, THE
PROPERTY/SUPPLY DIVISION SIGNS THE
"RECEIVED" PORTION OF THE DELIVERY RECEIPT (DR)
AND PREPARES THE INSPECTION AND ACCEPTANCE
REPORT (IAR).
 MUST REMEMBER!
MUST REMEMBER!

THE PROPERTY/SUPPLY DIVISION FORWARDS THE DR,

IAR AND PO TO THE PROPERTY INSPECTOR
 MUST REMEMBER!
MUST REMEMBER!

THE PROPERTY/SUPPLY DIVISION, THROUGH THE STOCK

CARD KEEPER, RECORDS THE ACCEPTED DELIVERIES IN
THE STOCK CARD (SC)
 MUST REMEMBER!
MUST REMEMBER!

THE ACCOUNTING DIVISION RECORDS THE ACCEPTED

DELIVERIES IN THE BOOKS OF ACCOUNTS AND IN THE
SUPPLIES LEDGER CARD (SLC)
 MUST REMEMBER!
MUST REMEMBER!
THE PROPERTY/SUPPLY DIVISION PREPARES THE
DISBURSEMENT VOUCHER (DV) THEN FORWARDS IT, TOGETHER
WITH SUPPORTING DOCUMENTS, TO THE ACCOUNTING DIVISION
FOR PROCESSING OF PAYMENT.

WHAT'S NEXT? DISPOSITION

 MUST REMEMBER!
MUST REMEMBER!
END USERS PREPARE THE REQUISITION AND ISSUE SLIP (RIS) TO
REQUEST FOR THE ISSUANCE OF ITEMS AVAILABLE ON STOCK.
THE HEAD OF THE REQUESTING INDIVIDUAL SHALL APPROVE THE
RIS.
THE APPROVED RIS IS THEN FORWARDED TO THE PROPERTY/SUPPLY
DIVISION.
 MUST REMEMBER!
MUST REMEMBER!
THE PROPERTY/SUPPLY DIVISION PREPARES THE REPORT OF
SUPPLIES AND MATERIALS ISSUED (RSMI). THE RSMI WILL BE USED
BY THE STOCK CARD KEEPER IN UPDATING THE SC AND THE
ACCOUNTING DIVISION IN JOURNALIZING THE ITEMS ISSUED.

 MUST REMEMBER!
MUST REMEMBER!

THE ACCOUNTING DIVISION RECORDS THE ITEMS ISSUED IN THE

BOOKS OF ACCOUNTS AND UPDATES THE SLC.

THE FOLLOWING ARE OTHER DOCUMENTS

USED IN THE DISPOSITION OF
INVENTORIES:

1 WAS TE MATER I AL S R EPO RT

p r e pa r ed by t he P r o p e r t y o r S up p ly Custo di a n
t o r epor t wa s t e d ma t e r i a l s, s uch a s de stro ye d
s p a r e p a r t s a n d o t he r sp oi la ge s .

2 R EPORT ON T H E PH Y S I CA L CO U N T O F
I NVENTORI ES

us e d i n r epor t i n g t he r e s u lts o f p hysi ca l

cou nt s. I t s ho ws t he b a l a n ce o f i n v e n to ry,
a s wel l a s a n y s ho r t a g e s or o v e ra ge s.
3 R EPORT OF ACCO U N T ABIL ITY F O R
ACCOUNTA B L E F O R MS

us e d t o r epor t t he mo v e m e n t a n d s ta tus o f
a cc ount a bl e f o r ms i n t he p o s s e ss i o n o f a n
of f i cer

4 I NVENTORY CU S T O D I AN SL IP

p r e pa r ed when i s s ui n g s e m i -
e x p enda ble pr o p e r t y.
END OF CHAPTER 7

WE ARE NOW OPEN

FOR QUESTIONS
AGRICULTURE
CHAPTER 8
 WHAT IS
AGRICULTURE?

AGRICULTURE MEANS FARMING OR THE PROCESS OF

PRODUCING CROPS AND RAISING LIVESTOCK.


AGRICULTURAL ACTIVITY

is the management by an entity of the biological transformation and

harvest of biological assets for sale, including exchange or non-
exchange transactions, or for conversion into agricultural produce, or
into additional biological assets.
 COMMON FEATURES OF
AGRICULTURAL ACTIVITIES

A.CAPABILITY TO B. MANAGEMENT OF C.MEASUREMENT OF

CHANGE CHANGE CHANGE

 BIOLOGICAL TRANSFORMATIONS

COMPRISES THE FF. PROCESSES THAT CAUSE QUALITATIVE OR

QUANTITATIVE CHANGES IN A BILOGICAL ASSET.

Asset changes through:

GROWTH PROCREATION DEGENERATION

INCREASE IN QUANTITY IS THE CREATION OF IS A DECREASE IN QUANTITY
AND QUALITY OF AN ADDITIONAL LIVING OR DETORIARATION IN
ANIMAL OR PLANT. ANIMALS OR PLANTS QUALITY OF AN ANIMAL OR
PLANT.


BIOLOGICAL ASSET

is a living animal or plant.



AGRICULTURAL PRODUCE

is the harvested product of

the entity’s biological assets.
 RECOGNITION

RECOGNIZED WHEN IT MEETS THE ASSET

RECOGNITION CRITERIA.
MEASUREMENT
 MEASUREMENTS
Presentation are communication tools that can be used as demonstrations,
lectures, reports, and more. it is mostly presented before an audience.

Biological assets are initially and subsequently measured at fair value less costs to sell.

Biological assets whose fair value cannot be reliably determined on initial recognition are
initially measured at cost and subsequently measured at cost less accumulated depreciation
and accumulated impairment losses.

·Agricultural produce are initially measured at fair value less costs to sell at the point of
harvest.
 DETERMINATION OF
FAIR VALUE

Quoted price in an active market xx

Less: Transport Cost (xx)
Fair Value xx
 ACTIVE
MARKET

is a market in which all of the following exists:

a. the items traded in the market are

homogenous.
b. willing buyers and sellers can normally be
found at any time; and
c. prices are available to the public.
 ACTIVE
MARKET
If there are more than one active markets, the entity
shall use the price in the market expected to be used.
If there is no active market, the entity shall estimate
the market price based on one of the following:

-MOST RECENT MARKET TRANSACTION PRICE

- MARKET PRICES FOR SIMILAR ASSETS WITH ADJUSTMENT TO

REFLECT DIFFERENCES

- SECTOR BENCHMARKS

- PRESENT VALUE OF EXPECTED NET CASH FLOWS FROM THE ASSET.

 DISCLOSURES

THE FOLLOWING ARE THE DISCLOSURES RELATED

TO AGRICULTURE:

Aggregate gain or loss on initial
recognition of biological assets
and agricultural produce.
Consumable and Bearer
biological assets
Consumable Biological Assets
Bearer Biological Assets
Consumable Biological Assets Bearer Biological Assets
ARE THOSE THAT ARE SELF-GENERATING AND ARE USED
ARE THOSE THAT ARE TO BE HARVESTED AS REPEATEDLY FOR MORETHAN ONE YEAR.
AGRICULTURAL PRODUCE OR TO BE SOLD OR
DISTRIBUTED AS BIOLOGICAL ASSETS.
Mature and Immature Biological Amount of Change in Fair Value -
Assets Cost to sell
Mature Biological Assets physical change
Immature Biological Assets price change
ILLUSTRATION: JOURNAL ENTRIES

Entity A purchases five breeding stocks at P3,000 each, equal to

the fair value less costs to sell (FVLCS) at the acquisition date. The
journal entry is as follows:

BREEDING STOCKS 15,000

DATE
CASH IN BANK-LOCAL CURRENCY, CURRENT 15,000
ACCOUNT
ILLUSTRATION: JOURNAL ENTRIES

Ten breeding stocks are born. The FVLCS on date of birth is

P.2,000 each. The journal entry is as follows.

BREEDING STOCKS 20,000

DATE
GAIN ON INITIAL RECOGNITION OF 20,000
BIOLOGICAL ASSETS.
 ON JANUARY 1, 20X1, ENTITY A HAS FIVE (5) 2-YEAR OLD BREEDING STOCKS WITH TOTAL
CARRYING AMOUNT OF P25,000. THE FOLLOWING TRANSACTIONS OCCURRED DURING THE
PERIOD:

A. ON JULY 1, 20X1, TEN (10) BREEDING STOCKS WERE BORN. THE FVLCS ON THIS DATE IS P2,000
EACH.

B. ON JULY 1, 20X1, TWO (2) 2-YEAR OLD BREEDING STOCKS WERE PURCHASED FOR P5,100 EACH,
EQUAL TO THE FVLCS ON THIS DATE.

C. ON DECEMBER 31, 20X1, THREE (3) BREEDING STOCKS WERE BORN. THE FVLCS ON THIS DATE IS
P2,100 EACH

THE FVLCS ON DEC. 31, 20X1 ARE AS FOLLOWS:

.

EXAMPLE
SOLUTION: (A. DUE TO PRICE CHANGE)

FORMULA: (FVLCS, END. AGE BEG.) – (FVLCS, BEG. AGE BEG.) X QTY.

FVLCS OF 2YRS.OLD FVLCS OF 2YRS. NO. OF ANIMALS

ON DEC. 31 OLD JAN. 1 INTHE GROUP
SOLUTION: (B. DUE TO PHYSICAL CHANGE)

FORMULA: (FVLCS, END. AGE END.) – (FVLCS, END. AGE BEG.) X QTY. + FVLCS OF NEWBORN AT DATE
OF BIRTH

FVLCS OF FVLCS OF
3 YRS. OLD 2 YRS.OLD ON
ON DEC. 31 DEC. 31

 the
END.
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