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INVENTORIES CONTROL
A FLIPPED LESSON FOR TCE ACCOUNTING STUDENTS
NATURE OF INVENTORIES
• ITEMS HELD BY THE BUSINESS TO SELL AT A PROFIT
IMPORTANCE OF INVENTORIES
CLICK ON ONE OF THE LEMONADE GAMES
IMPORTANCE OF INVENTORIES
• INVENTORIES ARE THE DRIVER OF SALES AND PROFIT FOR THE BUSINESS.
• A HIGH TURNOVER OF INVENTORIES MEANS A HIGHER CASH FLOW.
• A LOT OF MONEY IS INVESTED IN INVENTORIES
• TO MEET CUSTOMER DEMAND BY OFFERING INVENTORIES THAT THEY WANT AND AT THE RIGHT PRICE. QUALITY AND TYPE OF GOODS OFFERED FOR SALE.
• TO OFFER A RANGE OF INVENTORIES THAT CUSTOMERS CAN CHOOSE FROM.
PERPETUAL INVENTORY METHOD
• THE METHOD OF ACCOUNTING FOR INVENTORIES THAT KEEPS A CONTINUOUS RECORD OF ALL INVENTORIES PURCHASED AND SOLD.
COST PRICE AND SALES PRICE
• KEEP RECORD OF COST PRICE (COGS) AND SALE PRICE OF INVENTORIES (SALES)
STOCK CARDS
• USE OF STOCK CARDS FOR EACH ITEM
• A STOCK TAKE IS TAKEN AT REGULAR INTERVAL TO CHECK THE RECORD OF INVENTORIES CONTROL ACCOUNT.
INVENTORIES ADJUSTMENT
• DISCREPANCY BETWEEN ACTUAL NUMBER FROM STOCK TAKE AND RECORD OF INVENTORIES CONTROL ACCOUNT.
INVENTORIES ADJUSTMENT
• EXAMPLES OF STOCK LOSS AND GAIN
• VIEW CLIP:
• “WHY AN INVENTORIES ADJUSTMENT IS REQUIRED”
INVENTORIES ADJUSTMENT - LOSS
• THEFT.
• OVER SUPPLY TO CUSTOMER.
• UNDERSUPPLY FROM A SUPPLIER.
• DAMAGES AND BREAKAGES.
• STOCK TAKE ERROR.
INVENTORIES ADJUSTMENT - GAIN
• OVERSUPPLY FROM A SUPPLIER
• UNDERSUPPLY TO A CUSTOMER
• STOCK TAKE ERROR.
GENERAL JOURNAL ENTRIES
• VIEW CLIP
• “ACCOUNTING FOR AN INVENTORY ADJUSTMENT”
INVENTORIES ADJUSTMENT – IMPACT ON PROFIT
• INVENTORY LOSS – EXPENSE – DECREASE PROFIT.
• INVENTORY GAIN – REVENUE – INCREASE PROFIT.
CONTROL OVER INVENTORIES
•STORAGE
•PURCHASE
•SALE
•SIZE / LEVEL OF INVENTORIES
MANAGING INVENTORIES – STORAGE & SECURITY
• SOME INVENTORY ITEMS CAN BE STOLEN, GET LOST OR BECOME DAMAGED OR SPOILT.LEADS TO DISCOUNTING ITEMS AND LOWER PROFITS.
• SECURITY TO PREVENT THEFT AND PILFERING BY STAFF.
• SECURITY METHODS INCLUDE:TAGS, SCANNERS, CAMERAS, BAG CHECKS, SECURITY STAFF.
MANAGING INVENTORIES - PURCHASE
• JUST IN TIME PURCHASING TO MAINTAIN OPTIMUM LEVELS OF INVENTORIES
• BIG INVESTMENT IN INVENTORIES.
• TOO LITTLE TURNS OFF CUSTOMERS.
• TOO MUCH INCREASES COSTS OF STORAGE – RENT OF PREMISES AND WAREHOUSE.
• NEED TO MANAGE REORDER POINT, REORDER QUANTITY AND LEAD IN TIME FOR DELIVERY.
MANAGING INVENTORIES - SALE
• Take orders and freight in the next day.
• Quick dispatch of orders and delivery.
• Maintain accurate inventory levels.
• Increase inventories turnover.
INVENTORY TURNOVER
• INVENTORY TURNOVER (STOCK TURNOVER)=
• COST OF GOODS SOLD AVERAGE STOCK
• VARIES WITH EACH INDUSTRY.
• THE HIGHER THE BETTER.
INVENTORIES TURNOVER
• COGS = $265000
• INVENTORIES 1/7/13 = $90000
• INVENTORIES 30/6/14 = $110000
• = AVERAGE INVENTORIES = (90000+110000)/2 = 100000
• INVENTORIES TURNOVER = COGS/AVERAGE INVENTORIES
• =265000/100000
• =2.65 TIMES
TAKE THE TEST
• YOU WILL BE SENT LOGIN DETAILS FROM CLASSMARKER.
• YOU HAVE 20 MINUTES.
• ONE GO.
• IT WILL BE ASSESSED.