NOTES


CA-Foundation > Principles and Practice of Accounting > Inventories (Old & New)

FIFO and weighted average price method of stock costing.



Ans.
Under the First-In-First-Out (FIFO) method of valuation of stock, the actual issue of goods is usually the earliest lot on hand. Hence, the stock in hand will therefore consist of the latest consignments. The closing stock is valued at the price paid for such consignments. The weighted average price method is not a simple average price method. Under this method of valuation of stock, a stock ledger is maintained, recording receipts and issues on daily basis. A new average would be calculated on receiving fresh consignment. The average price thus calculated after considering arrival of new consignment with the previous value of stock and dividing the preceding stock value and the cost of new arrival with the total units of preceding and new arrival will give the weighted average price.

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Notes of Inventories (Old & New)



  1. LIFO and FIFO basis of costing of stock.
    see in detail

  2. FIFO and weighted average price method of stock costing.
    see in detail

  3. X who was closing his books on 31.3.2016 failed to take the actual stock which he did only on 9th April, 2016, when it was ascertained by him to be worth Rs.2,50,000. It was found that sales are entered in the sales book on the same day of dispatch and return inwards in the returns book as and when the goods are received back. Purchases are entered in the purchases day book once the invoices are received.
    It was found that sales between 31.3.2016 and 9.4.2016 as per the sales day book are Rs.17,200. Purchases between 31.3.2016 and 9.4.2016 as per purchases day book are Rs.1,200, out of these goods amounting to Rs.500 were not received until after the stock was taken.Goods invoiced during the month of March, 2016 but goods received only on 4th April, 2016 amounted to Rs.1,000. Rate of gross profit is 33-1/3% on cost.
    Ascertain the value of physical stock as on 31.3.2016    .


    see in detail

  4. From the following information, ascertain the value of stock as on 31.3.2017

     

    Rs.

    Value of stock on 1.4.2016

    7,00,000

    Purchases during the period from 1.4.2016 to 31.3.2017

    34,60,000

    Manufacturing expenses during the above period

    7,00,000

    Sales during the same period

    52,20,000








    At the time of valuing stock on 31.3.2016 a sum of Rs. 60,000 was written off a particular item which was originally purchased for Rs.2,00,000 and was sold for Rs.1,60,000. But for the above transaction the gross profit earned during the year was 25% on cost.


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  5. The Profit and loss account of Hanuman showed a net profit of Rs.6,00,000, after considering the closing stock of Rs.3,75,000 on 31st March, 2016. Subsequently the following information was obtained from scrutiny of the books:

    (i) Purchases for the year included Rs.15,000 paid for new electric fittings for the shop.

    (ii) Hanuman gave away goods valued at Rs.40,000 as free samples for which no entry was made in the books of accounts.

    (iii) Invoices for goods amounting to Rs.2,50,000 have been entered on 27th March, 2016, but the goods were not included in stock.

    (iv) In March, 2016 goods of Rs.2,00,000 sold and delivered were taken in the sales for April, 2016.

    (v) Goods costing Rs.75,000 were sent on sale or return in March, 2016 at a margin of profit of 33-1/3% on cost. Though approval was given in April, 2016 these were taken as sales for March, 2016.

    Calculate the value of stock on 31st March, 2016 and the adjusted net profit for the year ended on that date
    see in detail


CA-Foundation - Principles and Practice of Accounting:

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