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 Retail Price method of inventory valuation?
Inventory is an important asset entity holds and its valuation is critical as it not only affects figures in statement of financial position but also profit calculation. There are several methods to value year end inventory. However financial statements prepared under International Accounting Standards have limited set of methods that can be used to value […]
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 meant by Sale or Return?
Buying and selling arrangements between sellers and buyers may take different forms and sales contracts can have some unusual terms agreed between the parties. However, one of the common arrangements between supplier and customer is ‘sale or return‘ also known as ‘sale and return‘. This term is also commonly used as an alternative term to mean consignment […]
What is the difference between Purchase ledger and Purchase account?
Quite a basic question in fact. A lot of students realize about these concepts as soon as they start studying Auditing especially when they have to apply different audit procedures where these basic concepts play pivitol role and thus we cannot escape them. To begin with, we need to clear one misconception that LEDGER is […]
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 […]
Is ‘Cost of goods sold’ a Product cost or a Period cost?
Before we discuss under what heading should we classify cost of goods sold, let’s first of all clear out our minds for the terms inventoriable costs and period costs with a quick review. You can the answer on difference between period costs and product costs in good detail here. Inventoriable costs (Product cost) or Product […]
What is Specific identification method of inventory valuation?
Specific identification method is just another method to value ending inventory of the business to be reported in the financial statements. IAS 2 permits the use of specific identification method. According to this method each identified items of inventory is assigned specific cost and hence the name specific identification. In simple words cost is attributed […]
What is FISH inventory method?
FISH is the acronym for First-in, Still-here and is basically an alternative name for Last-in, First-out (LIFO) method. Usually authors and article writers come up with novel terms sometimes to make things even more understandable or sometimes just to make fun. So FISH terminology for LIFO system might just be the similar kind of case. […]
