What is ABC Analysis?
ABC analysis is one of the known inventory classification methods available in which inventory is categorized in three classes A, B and C where A being most important, B being important and C being less important. ABC analysis is also known as Pareto Analysis, Pareto rule or 80/20 rule. ABC analysis must not be confused with […]
What is meant by Carriage inwards and its accounting treatment?
Carriage inwards, transportation inwards, transport inwards, freight inwards or shipping cost are the cost borne by the buyer of the goods for moving the goods from supplier’s place to his own place (usually raw material store) or for receiving the goods at his place as such costs are to paid once delivered. It is often […]
What is work in process or work in progress inventory?
Work in process inventory is such asset that is still in the process of completion and not yet ready to be categorised as finished goods.In a manufacturing concern raw materials are converted to finished goods by applying labour and overheads (thus the main reason why labour and overheads cost collectively called conversion cost). However, it […]
What is Continuous stocktaking?
Stocktaking is simply physical checking or counting of inventory held by the entity and by continuous stocktaking it means inventory counts that are undertaken on regular basis. Continuous stocktaking method is used over periodic stock counts to increase accuracy especially for the goods which are high value or have high turnover i.e. fast moving inventory/goods and […]
What is NIFO inventory valuation method?
NIFO - Next in, First out is an inventory valuation technique in which issues to the production hall are valued at the current market price i.e. current cost or replacement cost instead of the cost at which material was bought i.e. historical cost. This valuation method attempts to keep the production cost accurate according to […]
What are different inventory valuation methods?
There are numerous valuation techniques to value the inventory or stock. However, here is the short list of those which are known. To learn more about each method, click the name! Specific identification method FIFO - First in, First out method LIFO - Last in, First out method HIFO - Highest in, First out NIFO […]
Why LIFO is not permissible under IFRS?
After the revision of IAS 2 Inventories in 2003, LIFO was explicitly prohibited to be used by the entities following International Accounting Standards to prepare and present financial statements. Before this revision LIFO was available as allowed alternative i.e. an option if company wishes to use the inventory valuation method other than the preferred method. […]
What is the difference between Waste, Scrap, Spoil and Defect?
Waste: This is a loss connected with raw material or inputs to the production process and usually means to refer that input has been lost due to any reason either because of its nature of the material itself, nature of the process or some other conditions. Sometimes such output that does not have any sales […]
What is HIFO?
HIFO is an acronym for Highest in, First out. This inventory valuation method assumes that inventory with highest bought in value i.e. highest purchase price in the stock will be consumed first or in other words will be sent out to production hall at first place. One of the main advantage of using HIFO method […]
