Cost calculation methods in periodic system (+ example)
Session 1
In general, there are two systems for evaluating ending inventory. These two methods include periodic registration system and permanent inventory registration system.
In the permanent registration system, inventory records and documents are regularly and permanently maintained and all purchase and sale items are recorded in the order of date in the inventory card.
In the periodic registration system, the inventory values are counted on a certain date (usually the end of the year) and then using a commodity pricing method (FIFO, LIFO, weighted average or special identification method) to determine the value of the inventory at the end of the action period. will be
Inventory measurement systems:
1. FIRST IN FIRST OUT method
2. The method of the first export from the last import (Lifo) LAST IN FIRST OUT
3. Weighted average method
4⃣ Special identification method
A) The method of first outgoing from first incoming: FIRST IN FIRST OUT
In this method, which is known as the FIFO method, it is assumed that the purchased goods are taken out of the warehouse in the order that they enter the warehouse, that is, the goods that are purchased first are consumed or sold first, so the goods that remain in the warehouse at the end of the period are related It is for the last purchases and we consider their purchase price as the inventory value of the goods at the end of the period.
To clarify the issue, let’s examine the following example:
For example, let’s assume that in a trading company, the ending inventory of one item of the company’s goods at the end of fiscal year 83 is 500, and the following information is available about that item:
Number of rates (riyals)
— —-
Inventory of the first period 200 300
First purchase 250 320
Second purchase 300 330
Third purchase 250 350
The inventory price at the end of the period is calculated using the FIFO method as follows:
Considering that the remaining goods at the end of the period are among the last purchases, so we price the remaining 500 goods in the order of the last purchases. And we calculate as follows:
The third purchase price is 250*350=87500
The number of remaining balance at the end of the period is 500-250=250
The remaining price from the second purchase = 250*330=82500
The cost price of the balance at the end of the period is 170,000=82,500+87,500
In other words, from the purchases made during the year and the inventory at the beginning of the year, only 250 items from the third purchase and 250 items from the second purchase remain, and the rest of the purchased items and the inventory at the beginning of the period have been sold or removed from the warehouse.
continues.
What we will say next:
The method of first output from last input: LAST IN FIRST OUT
Special identification method
Weighted average method
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This post is written by mda140