INVENTORY ACCOUNT SYSTEM

on
ABS Softech Pvt. Ltd.

GROUP NO. 6
 MEANING
Inventory can be identified as
tangible property held for sale in the
ordinary course of business,
Or in the process of production for
such sale,
Or for the consumption in the
production of goods,
or services for sale
 Types of company:
Merchandising
Manufacturing
Service
 TYPES OF INVENTORY
Types
Manufacturing
Trading
Service
ofWork-in-progress
Tangible
Inventory
concerns
Concerns
Assets
concerns
Basis of Inventory Valuation

Net Realizable
Cost
value

Whichever is less

Value of Inventory
 INVENTORY ACCOUNT
SYSTEM
There are two principal systems of
determining the physical quantities
and monetary value of inventories
sold and in hand
Periodic Inventory System
Perpetual Inventory System
 PERIODIC INVENTORY
SYSTEM
It is a method of ascertaining inventory
By taking an actual physical count of all
the inventory items on hand at a particular
date on which inventory is required
It is simple and less expensive than the
perpetual system
Stock amount is adjusted at the end of the
accounting period to determine cost of
goods
 PERPETUAL INVENTORY
SYSTEM
It is a system of recording inventory
balances after each receipt and issue
Physical stock should be checked and
compared with recorded balances
CoG issued is directly and SoG is
taken as residual figure with the help
of stock ledger
Maintenance of stock ledger to have
record of goods on continuous basis
 Distinction between PI and
Based on physical PIS
Based on book records
verification
Provides continuous
Provides information information about stock
about stock and CoS and CoS
Determine inventory and Determine CoS and
takes CoGS as residual compute stock as
figure balancing figure
CoGS-loss of goods as CS- loss of goods as all
goods not in stock are unsold goods are assumed
assumed to be sold to be in inventory
Inventory control is not Inventory control can be
possible exercised
Simple and less exp. Costlier method
Requires closure of Determined without
business for count stock affecting the operation
Inventory
INVENTORY METHOD
Specific
Weighted
Historical
Not-
Method identification
Historical
Not- Ordinary average
MethodMethod
interchange method
price