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Frank Wood’s
Business Accounting 1
Chapter 3
Recording inventory
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.2
Learning objectives
After finishing this chapter, you will be able
to:
Explain why it is inappropriate to use an
inventory account to record increases and
decreases in inventory;
Describe the two causes of inventory
increasing;
Describe the two causes of inventory
decreasing;
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.3
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.4
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.5
Inventory
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.6
An increase in inventory
An increase in inventory can be due to one
of two causes:
The purchase of additional goods.
The return in to the business of goods
previously sold.
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.7
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.8
A decrease in inventory
A decrease in inventory can be due to one
of two causes:
The sale of goods.
Goods previously bought by the business
now being returned to the supplier.
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.9
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.10
Activity
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.11
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.12
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.13
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.14
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.15
Returns inwards
On 5 August 2012, goods which had been
previously sold to F. Lower for £29 are
now returned to the business.
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.16
Returns outwards
On 6 August 2012, goods previously bought
for £96 are returned by the business to
K. Howe.
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.17
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.18
Learning outcomes
You should have now learnt:
That it is not appropriate to use an inventory
account to record increases and decreases
in inventory because inventory is normally
sold at a price greater than its cost.
That inventory increases either because
some inventory has been purchases or
because the inventory that was sold has
been returned by the buyer.
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.20
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018
Slide 3.22
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 14th Edition, © Pearson Education Limited 2018