All asset notes in one place:
IAS 2 - Inventories
IAS 16 - PPE
IAS 36 - Impairment of assets
IAS 38 - Intangible assets
IAS 40 - Investment Property
Summarised information with additional examples and explanations as well was class questions and answers
inventory = assets held for sale in the ordinary course of business, in the process of production for such sale or in the form of
materials / supplies to be consumed in the production process / the rendering of services
First year revision
• PROFIT MARGINS
eg: 20% GP on cost price:
SP = 120
1) Gross Profit as % of cost price
CP = (100)
∴ cost price = 100%
GP = 20
2) Gross Profit as % of sales price
∴ sales price = 100% eg: 20% GP on sales price:
SP = 100
CP = (80)
1) Discounts GP = 20
eg: GP is 30% on sales price and there is a 5% discount:
* capitalisation ceases when good is in location / condition necessary for its intended use
Inventory Systems
• The two inventory system in terms of which inventory is recorded are a perpetual or a periodic system.
Perpetual Periodic
• Continuous record of inventory on hand • Physical inventory count used as the record of the closing
• Inventory account updated with every movement in INV. inventory
• Cost of inventory sold – continuously known
• Physical inventory count vs inventory account = inventory loss
In a perpetual system, just as the name suggests, inventory records In a periodic system, we are not going to constantly update the
are updated constantly – ie. with each sales transaction or sales inventory records.
return, we are going to update the inventory account and account
for cost of sales. At the end of the financial period, we will physically count the
inventory and then the inventory sold (cost of sales) will be
calculated as the balancing figure
DR – Cost of sales (P/L) cost price No journal for the cost price movement!
CR – Inventory (SFP) cost price Cost of sales
= opening inventory + purchases – purchase returns + other costs
part of cost price of inventory – closing inventory.
There is not a difference in the R-values between the two systems,
iro what is eventually accounted in the cost of sales, journals just
differ
4
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