CIMA BA3 Syllabus C. PREPARATION OF ACCOUNTS FOR SINGLE ENTITIES - Adjustments for inventory - Notes 12 / 20
Inventories
Inventories are assets:
held for sale in the ordinary course of business;
in the process of production for such sale; or
in the form of materials or supplies to be consumed in the production process or in the rendering of services.
Inventory can be a significant figure for some businesses, e.g. manufacturing companies.
It affects the financial statement in two ways:
Statement of financial position: it is included as a current asset
Statement of profit or loss:
opening and closing inventory have a direct impact on cost of sales and therefore profits.
(The cost of goods sold is calculated as: Opening inventory + Purchases – Closing inventory).
All businesses must therefore ensure that their financial statements account for inventory accurately in terms of:
the accounting adjustment
its valuation
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Syllabus C. PREPARATION OF ACCOUNTS FOR SINGLE ENTITIES
C1. Prepare accounting adjustments
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Opening and closing inventory
Syllabus C. PREPARATION OF ACCOUNTS FOR SINGLE ENTITIES
C1. Prepare accounting adjustments