Accounting for Material

Stock/inventory valuation:
1. First in first out method (FIFO)
2. Last in first out method (LIFO)
First-in First-out (FIFO) Method
The method in which materials are issued form the store on a first come first serve basis
is called FIFO method. In this method, materials are issued strictly on a chronological
order. The units of opening stock of materials are issued first, the units from the first
purchase are issued next and the closing stock is remained in stock always from the
latest purchase. The value of the closing stock of materials is at the price of the latest
purchase.
 The following transactions are given to you:
Baishak 1: Opening Balance 100 kgs @ Rs. 10/kg
Baishak 2: Purchase 200 kgs @ Rs. 11/kg
Baishak 3: Purchase 300 kgs @ Rs. 12/kg
Baishak 4: Issue 80kgs
Baishak 5: Issue 120 kgs
Baishak 6: Issue 200 kgs
Baishak 7: Purchase 500 kgs @ Rs. 13/kg
Required: Store Ledger under
(a) FIFO
 Store Ledger (FIFO method)
Receipts Issues Balance
Date Particulars Rat Rat Rat
Qty. e Amt. Qty. e Amt. Qty. e Amt.
Baishak 1 Balance b/d 100 10 1000
Baishak 2 Purchase 200 11 2200 _ _ _ 100 10 1000
200 11 2200
Baishak 3 Purchase 300 12 3600 _ _ _ 100 10 1000
200 11 2200
300 12 3600
Baishak 4 Issue _ _ _ 80 10 800 20 10 200
200 11 2200
300 12 3600
Baishak 5 Issue _ _ _ 20 10 200
100 11 1100 100 11 1100
300 12 3600
Baishak 6 Issue _ _ _ 100 11 1100
100 12 1200 200 12 2400
Baishak 7 Purchase 500 13 6500 _ _ _ 200 12 2400
500 13 6500
Closing Stock
Qty. Rate Amount
200 12 2400
500 13 6500
700 8900
 The following transactions are given to you:
Baishak 1: Opening Balance 200 kgs @ Rs. 20/kg
Baishak 2: Purchase 400 kgs @ Rs. 22/kg
Baishak 3: Purchase 600 kgs @ Rs. 24/kg
Baishak 4: Issue 160kgs
Baishak 5: Issue 240 kgs
Baishak 6: Issue 400 kgs
Baishak 7: Purchase 1000 kgs @ Rs. 26/kg
Required: Store Ledger under
(a) FIFO
Last-In-First-Out (LIFO) Method
This method follows the principle that the last items of materials purchased are issued
at first. The valuation of the materials issued is made according to the latest purchase
price of materials. The closing stocks of the materials are valued always on the earliest
prices of the materials. In case of a rising price, this method is suitable because material
is issued at current market prices.
 Y Ltd. furnishes the following store transactions for Jestha, 2071:
Jestha 1 Opening balance 100 units at Rs. 100 each.
Jestha 5 Received 200 units at Rs. 105 each.
Jestha 12 Received 300 units at Rs. 106 each.
Jestha 16 Issued 400 units.
Jestha 20 Issued 120 units.
Jestha 22 Received 400 units at Rs. 110 each.
Jestha 25 Issued 200 units.
Jestha 28 Received 300 units @ Rs. 114 each.
Jestha 30 Received 200 units @ Rs. 115 each.
Jestha 32 Issued 400 units.
Required: The value of closing stock under LIFO method by preparing Store Ledger
Account
 Stores Ledger Account
(Under LIFO Method)
Receipts Issues Balance
Date Particulars Qty Rat Qty Rat Qty Rat
. e Amt. . e Amt. . e Amt.
1000
Jestha 1 Opening balance 100 100 0
1000
Jestha 5 Purchases 200 105 21000 100 100 0
2100
200 105 0
Jestha 1000
12 Purchases 300 106 31800 100 100 0
2100
200 105 0
3180
300 106 0
Jestha 3180 1000
16 Issues 300 106 0 100 100 0
1050 1050
100 105 0 100 105 0
Jestha 1050
20 Issues 100 105 0 80 100 8000
20 100 2000
Jestha
22 Purchases 400 110 44000 80 100 8000
4400
400 110 0
Jestha 2200
25 Issues 200 110 0 80 100 8000
2200
200 110 0
Jestha
28 Purchases 300 114 34200 80 100 8000
2200
200 110 0
3420
300 114 0
Jestha
30 Purchases 200 115 23000 80 100 8000
2200
200 110 0
3420
300 114 0
 2300
200 115 0
Jestha 2300
32 Issues 200 115 0 80 100 8000
2280 2200
200 114 0 200 110 0
1140
100 114 0
Closing stock 380 units of Rs. 41,400.

 Y Ltd. furnishes the following store transactions for Jestha, 2071:

Jestha 1 Opening balance 110 units at Rs. 110 each.
Jestha 5 Received 210 units at Rs. 115 each.
Jestha 12 Received 320 units at Rs. 116 each.
Jestha 16 Issued 420 units.
Jestha 20 Issued 130 units.
Jestha 22 Received 410 units at Rs. 120 each.
Jestha 25 Issued 410 units.
Jestha 28 Received 320 units @ Rs. 124 each.
Jestha 30 Received 230 units @ Rs. 125 each.
Jestha 32 Issued 440 units.
Required: The value of closing stock under LIFO method by preparing Store Ledger
Account

Materials shortage/wastage/loss/damaged/deficit
It is that part of materials which is lost or damaged in store handling in manufacturing
process. The value of such material is recorded on the issue column. The issue price of
such materials will be followed on the methods of issue (FIFO or LIFO).
Materials returned from department/returned from work order/returned from
workshop/returned to stores
When the materials are returned to the stores from the department, they should be
treated as new receipts and are recorded in the receipt side of store ledger like
purchase of materials. These materials maybe valued by one of the following methods:
a. At the same price at which materials were issued. In this method materials
returned to stores are entered at the original issue price which is obtained from
the original materials.
b. At the current issue price. In this case materials returned to stores are recorded
at the current issue price (Latest issue price).

3. The stores transactions for the last month are as under:

Date Particulars Cost per unit Units
1 Opening stock Rs. 10 600
5 Purchased Rs. 11 1,500
10 Issue 1,300
15 Purchased Rs. 12 2,000
18 Issued 2,100
25 Returned from issued at 10th 300
Required: Stores ledger under First-in First-out method.
Stock Ledger Account
Using FIFO Method
Receipts Issued Balance
Date Particulars Rat Rat Rat
Qty. e Amt. Qty. e Amt. Qty. e Amt.
1 Opening stock _ _ _ _ _ _ 600 10 6000
150 1650
5 Purchased 0 11 0 _ _ _ 600 10 6000
150
0 11 16500
10 Issued _ _ _ 600 10 6000 800 11 8800
700 11 7700
200
15 Purchased 0 12 2400 _ _ _ 800 11 8800
200
0 12 24000
18 Issued _ _ _ 800 11 8800 700 12 8400
130
0 12 15800
25 Return from issued 300 11 3300 _ _ _ 700 12 8400
300 11 3300
Closing stock 700 units @ Rs. 12 = 8400 300 units @ Rs. 11 = 3300
4. Stores transactions during the month of Magh are as under:
Opening Stock:
Magh 1 : 500 units @ Rs. 10 each
Purchased
Magh 4 : 600 units @ Rs. 11 per unit
Magh 9 : 600 units @ Rs. 12 per unit
Magh 20 : 600 units @ Rs. 12.50 per unit
Issued:
Magh 7 : 500 units
Magh 15 : 500 units
Magh 25 : 500 units
Stock verification loss:
Magh 28 : 20 units
Required: Store ledger under FIFO method.

Stock Ledger under FIFO method

Receipts Issued Balance
Date Particulars Rat
Qty. Rate Cost Qty. e Cost Qty. Rate Cost
Magh 1 Opening stock _ _ _ _ _ _ 500 10 5000
Magh 4 Purchased 600 11 6600 _ _ _ 500 10 5000
600 11 6600
Magh 7 Issued _ _ _ 500 10 5000 600 11 6600
Magh 9 Purchased 600 12 7200 _ _ _ 600 11 6600
600 12 7200
Magh
15 Issued _ _ _ 500 11 5500 100 11 1100
600 12 7200
Magh 12.5
20 Purchased 600 0 7500 _ _ _ 100 11 1100
600 12 7200
600 11.5 7500
 0
Magh
25 Issued _ _ _ 100 11 1100 200 12 2400
12.5
400 12 4800 600 0 7500
Magh
28 Verification loss _ _ _ 20 12 240 180 12 2160
12.5
600 0 7500
Closing stock:
180 units @ Rs. 12 = Rs. 2,160
600 units @ Rs. 12.50 = Rs. 7,500
780 units = Rs. 9,660
5. Stores transactions during the month of Magh are as under:
Opening Stock:
Magh 1 : 600 units @ Rs. 11 each
Purchased
Magh 4 : 800 units @ Rs. 12 per unit
Magh 9 : 800 units @ Rs. 13 per unit
Magh 20 : 800 units @ Rs. 14.50 per unit
Issued:
Magh 7 : 700 units
Magh 15 : 700 units
Magh 25 : 700 units
Stock verification loss:
Magh 28 : 22 units
Required: Store ledger under FIFO method.

6. Stores transactions during the month of Magh are as under:

Opening Stock:
Magh 1 : 550 units @ Rs. 12 each
Purchased
Magh 4 : 680 units @ Rs. 14 per unit
Magh 9 : 680 units @ Rs. 15 per unit
Magh 20 : 680 units @ Rs. 16.50 per unit
Issued:
Magh 7 : 525 units
Magh 15 : 525 units
 Magh 25 : 525 units
Stock verification loss:
Magh 28 : 26 units
Required: Store ledger under FIFO method.

7. The following record of receipts and issues of a material were extracted during
Baishakh, 2071.
Date Received Issued
1 Baishakh Opening stock 500 units @ Rs. 20
3 Baishakh 100 units
4 Baishakh 200 units
5 Baishakh 100 units
13 Baishakh 400 units @ Rs. 20 per unit
16 Baishakh 400 units
20 Baishakh 300 units @ 21 per unit
24 Baishakh 200 units
25 Baishakh 600 units @ Rs. 22 per unit
26 Baishakh 300 units
28 Baishakh 200 units @ Rs. 22 per unit
Returned items form the department are as follows:
14th Baishakh 30 units
th
28 Baishakh 70 units
The stock verification of the factory found a shortage of 20 units on 22nd Baishakh.
Required: Store ledger under FIFO method.

Store Ledger Account

(Under FIFO method)
Receipts Issued Balance
Date
Particulars Rat Rat
2069
Qty. e Amount Qty. Rate Amount Qty. e Amount
Baisak 1 Opening balance _ _ _ _ _ _ 500 20 10000
3 Issued _ _ _ 100 20 2000 400 20 8000
4 Issued _ _ _ 200 20 4000 200 20 4000
5 Issued (latest) _ _ _ 100 20 2000 100 20 2000
13 Purchased 400 20 8000 _ _ _ 500 20 10000
14 Returned 30 20 600 _ _ _ 530 20 10500
 16 Issued _ _ _ 400 20 8000 130 20 2600
20 Purchased 300 21 6300 _ _ _ 130 20 2600
300 21 6300
22 Shortage _ _ _ 20 20 400 110 20 2200
300 21 6300
24 Issued _ _ _ 110 20 2200 210 21 4410
90 21 1890
25 Purchased 600 22 13200 _ _ _ 210 21 4410
600 22 13200
26 Issued _ _ _ 210 21 4410 510 22 11220
90 22 1980
28 Purchased 200 22 4400 _ _ _ 510 22 11220
200 22 4400
28 Returned 70 22 1540 _ _ _
510 22 11220
200 22 4400
70 22
8. A Manufacturing Company showed its purchase and issue of certain material in the
following sequences:
Baishak 1 Opening stock 600 units @ Rs. 200 per unit
Baishak 4 Issued 300 units
11 Purchased 200 units @ Rs. 19 per unit
14 Returned from workshop 20 units
18 Issued 180 units
22 Purchased 300 units @ Rs. 21 per unit
23 Issued 320 units
Required: store ledger under FIFO method
[Ans: 320 unit and Rs. 6,700]

9. Following are the stores transactions for the month of Bhadra:

Bhadra 1 Opening balance 700 units @ Rs. 10 each
4 Purchased 300 units @ Rs. 9 each
12 Issued 500 units
15 Returned from department 50 units
20 Purchased 200 units @ Rs. 10 each.
30 Issued 450 units
Required: Store ledger under LIFO method.
[Ans: Closing stock 300 units of Rs. 3,000]
10. Stores transactions of a limited company for the month of Falgun 2067 are given
below:
Falgun 1 Opening stock: 1,000 units @ Rs. 50 each
Falgun 6 Purchased: 1,500 units @ Rs. 52 each
Falgun 11 Issued: 1,200 units
Falgun 17 Purchased: 1,300 units @ Rs. 55 each
Falgun 24 Issued: 2,000 units
Falgun 26 Returned from work order:10 units of Rs. 55 each
Falgun 30 Stock verification loss: 20 units
Required: Stores ledger under FIFO method
[Ans: Closing stock 680 units of Rs. 37,400]

11. Following are the transactions of materials of a company for the month of Chaitra:
Chaitra 1 Opening stock 600 units @ Rs. 10 per unit
Chaitra 5 Purchased 900 units @ Rs. 12 per unit
Chaitra 11 Issued 1,100 units
Chaitra 15 Return to store 100 unit
Chaitra 20 Purchased 400 units @ Rs. 11 per unit
Chaitra 25 Issued 700 units
Chaitra 27 Shortage on stock verification 50 units.
Required: Stores ledger under FIFO method
[Ans: Closing stock 150 units of Rs. 1,650]

12. The following are the purchases and supplies of materials in a factory during January
2014 January 1
Opening Balance 1,000 kgs. At Rs. 30 per K.g.
January 3 Issued 140 kgs.
January 4 Issued 200 kgs.
January 8 Issued 160 kgs.
January 13 Received from vendor 400 kg. Rs. 35 per kg.
January 15 Returned of surplus from a work order 30 kg.
January 16 Issued 360 kgs.
January 18 Received from Vendor 600 kgs. At Rs. 32 per kg.
January 20 Issued 550 kgs.
 January 22 Received from vendor 400 kgs. At Rs. 34 per kg.
January 24 Issued 250 kgs.
January 29 Returned of surplus from a work order 40 kgs at Rs. 32 per kg.
Prepare separate statements showing the value of the issues noted above to be
arrived at under LIFO and FIFO methods.
Store Ledger Account
(Under FIFO method)
Receipts Issued Balance
Date
Particulars Rat Rat
2012
Qty. e Amount Qty. Rate Amount Qty. e Amount
Jan 1 Opening balance _ _ _ _ _ _ 1000 30 30000
Jan 3 Issued _ _ _ 140 30 4200 860 30 25800
Jan 4 Issued _ _ _ 200 30 6000 660 30 19800
Jan 8 Issued _ _ _ 160 30 4800 500 30 15000
Jan 13 Purchased 400 35 140000 _ _ _ 500 30 15000
400 35 14000
Jan 15 Returned 30 30 900 _ _ _ 530 30 15900
400 35 14000
Jan 16 Issued _ _ _ 360 30 10800 170 30 5100
400 35 14000
Jan 18 Purchased 600 32 19200 _ _ _ 170 30 5100
400 35 14000
600 32 19200
Jan 20 Issued _ _ _ 170 30 5100 20 35 700
380 35 13300 600 32 19200
Jan 22 Purchased 400 34 13600 _ _ _ 20 35 700
600 32 19200
400 34 13600
Jan 24 Issued _ _ _ 20 35 700 370 32 11840
230 32 7360 400 34 13600
Jan 29 Returned 40 32 1280 _ _ _ 410 32 13120
400 34 13600
Value of closing stock; 810 units for Rs. 26,720
Store Ledger Account
(Under LIFO method)
Receipts Issued Balance
Date Particulars Rat Rat
Qty. e Amount Qty. Rate Amount Qty. e Amount
Jan 1 Opening balance _ _ _ _ _ _ 1000 30 30000
3 Issued _ _ _ 140 30 4200 860 30 25900
4 Issued _ _ _ 200 30 6000 660 30 19800
8 Issued _ _ _ 160 30 4800 500 30 15000
13 Purchased 400 35 14000 _ _ _ 500 30 15000
400 35 14000
 15 Return 30 30 900 _ _ _ 530 30 15900
400 35 14000
16 Issued _ _ _ 360 35 12600 530 30 15900
40 35 1400
18 Purchased 600 32 19200 _ _ _ 530 30 15900
50 35 1400
600 32 19200
20 Issued _ _ _ 550 32 17600 530 30 15900
40 35 1400
50 32 1600
22 Purchased 400 34 13600 _ _ _ 530 30 15900
40 35 1400
50 32 1600
400 34 13600
24 Issued _ _ _ 250 34 8500 530 30 15900
40 35 1400
50 32 1600
150 34 5100
29 Returned 40 32 1280 _ _ _ 530 30 15900
40 35 1400
90 32 2880
150 34 5100
Value of closing stock = 810 units for Rs. 25,280

13. Stores Transactions of a limited company for the month of Shrawan 2068 are given
below:
Jan 1: Opening stock 2,000 units @ Rs. 60
Jan 4: Purchased 1,000 units @ Rs. 65
Jan 10: Purchased 500 units @ Rs. 70
Jan 15: Issued 600 units
Jan 21: Issued 100 units
Jan 23: Received from work order 30 units
 Jan 29: Stock verification loss 10 units
Required: Stores ledger under LIFO method
[Ans: Closing stock 2,820 units of Rs. 173,300]

14. The receipts and issued of materials for the month of Baishakh 2069 are given
below:
Baishakh 1: Opening balance 600u units at Rs. 10
Baishakh 4: Purchase 800 units at Rs. 11
Baishakh 10: Issued 300 units
Baishakh 11: Issued 400 units
Baishakh 12: Purchased 400 units at Rs. 12
Baishakh 25: Received back from work order: 50 units at Rs. 11
Baishakh 26: Stock verification loss from latest purchase 15 units
Required: Stores ledger under FIFO method
[Ans: Closing stock: 1,135 units for Rs. 12,885]

15. Following are the store transactions for the month of Magh.
Magh 1: Opening balance 500 units @ Rs. 10 per unit
Magh 5: Purchased: 600 units @ Rs. 11 per unit
Magh 10: Issued: 700 units
Magh 15: Return from work order: 20 units
Magh 20: Purchased: 400 units @ Rs. 12 per unit
Magh 25: Issued: 720 units
Required: Stores ledger under FIFO method
[Ans: Closing stock: 100 units @ Rs. 12]

Returned to Vendor (Supplier)

Materials purchased may be returned to the supplier or vendor for not being according
to the order, for being defective or for not being according to the sample. The quantity
and value of materials returned are shown in the issue column of a store ledger.
a. Under the LIFO and FIFO method, the materials returned to the supplier are valued
at the price of the latest units purchase.
Surplus of Material
If additional is not given, the price of surplus material gain in store verification is valued
from the price of recent material received (latest purchased).
16. The following are the details and issues of materials during Ashadh:
1 Opening stock 400 units @ Rs. 5 each
3 Purchased 1600 units @ Rs. 6 each
5 Issued 1000 units
10 Returned to vendors 100 units purchased on 3rd Ashadh
12 Returned from a work order 20 units
15 Issued 500 units
16 Purchased 1000 units @ Rs. 5.50 each
20 Stock verification surplus 10 units
25 Issued 500 units
Required: Store ledger under LIFO method.

Store Ledger (Under LIFO method)

Receipts Issued Balance
Date Particulars
Qty. Rat Amount Qty. Rate Amount Qty. Rat Amount
 e e
Ashad 1 Opening stock _ _ _ _ _ _ 400 5 2000
3 Purchased 1600 6 9600 _ _ _ 400 5 2000
1600 6 9600
5 Issued _ _ _ 1000 6 6000 400 5 2000
600 6 3600
10 Returned to vendor _ _ _ 100 6 6000 400 5 2000
500 6 3000
12 Return from work order 20 6 120 _ _ _ 400 5 2000
520 6 3120
15 Issued _ _ _ 500 6 3000 400 5 2000
20 6 120
16 Purchased 1000 5.50 5500 _ _ _ 400 5 2000
20 6 120
1000 5.50 5500
20 Surplus material 10 5.50 55 _ _ _ 400 5 2000
20 6 120
1010 5.50 5555
25 Issued _ _ _ 500 5.50 2750 400 5 2000
20 6 120
510 5.50 2805

Closing Stock
400 units @ Rs. 5 = Rs. 2,000
20 units @ Rs. 6 = 120
510 units @ Rs. 5.50 = 2,805
930 units = Rs. 4,925

17. The following are the details and issues of materials during Ashadh:
1 Opening stock 450 units @ Rs. 6 each
3 Purchased 1650 units @ Rs. 7 each
5 Issued 1050 units
10 Returned to vendors 150 units purchased on 3rd Ashadh
12 Returned from a work order 25 units
15 Issued 550 units
16 Purchased 1050 units @ Rs. 6.50 each
20 Stock verification surplus 15 units
25 Issued 550 units
 Required: Store ledger under LIFO method.

18. The following are the details and issues of materials during Ashadh:
1 Opening stock 500 units @ Rs. 6 each
3 Purchased 1800 units @ Rs. 8 each
5 Issued 1200 units
10 Returned to vendors 200 units purchased on 3rd Ashadh
12 Returned from a work order 40 units
15 Issued 700 units
16 Purchased 1500 units @ Rs. 8.50 each
20 Stock verification surplus 20 units
25 Issued 550 units
Required: Store ledger under LIFO method.

19. The following are the details and issues of materials during Ashadh:
1 Opening stock 800 units @ Rs. 7 each
3 Purchased 3200 units @ Rs. 9 each
5 Issued 2000 units
10 Returned to vendors 200 units
12 Returned from a work order 40 units
15 Issued 1000 units
16 Purchased 2000 units @ Rs. 8.50 each
20 Stock verification surplus 40 units
25 Issued 800 units
Required: Store ledger under LIFO method.

Simple Average Method

20. The following are the store transactions for the month of January 2021.
Jan 1 Received: 500 units @ Rs. 20
Jan 10 Received: 300 units @ Rs. 24
Jan 15 Issued: 700 units
Jan 20 Received: 400 units @ Rs. 28
Jan 25 Issued: 300 units
Jan 27 Received: 500 units @ Rs. 22
Jan 31 Issued: 200 units
 Assume the company follows simple average cost method in perpetual system.
Required: (a) Cost of goods sold (b) Ending Inventories
Store Ledger (SAM)
Receipts Issued Balance
Date Particulars Rat Amoun Rat Amoun Rat Amoun
Qty. e t Qty. e t Qty. e t
Jan 1 Received 500 20 10,000 _ _ _ 500 20 10,000
17,20
10 Received 300 24 7,200 _ _ _ 500 20 10,000 0
300 24 7,200
15 Issued _ _ _ 500
200 22 15,400 100 24 1,800
13,00
20 Received 400 28 11,200 _ _ _ 100 24 1,800 0
400 28 11,200
25 Issued _ _ _ 100
200 26 7,800 200 28 5,200
16,20
27 Received 500 22 11,000 _ _ _ 200 28 5,200 0
500 22 11,000
31 Issued _ _ _ 200 25 5,000 500 22 11,200
120
0 28200 500 11200
Cost of Goods sold = 1200 units of Rs. 28,200
Closing stock: 500 units of Rs. 11,200

21. Beta Company provided you following details.

Date Particulars Units Cost Amount
Jan .1 Inventory 15 20 300
14 Sale 7
20 Purchase 10 21 210
 26 Sale 10
28 Sale 3
30 Purchase 10 22 220
Assume the company follows uses a perpetual system
Required: Cost of goods sold and Ending Inventories under:
a. FIFO
b. LIFO
c. Simple average cost method
d. Weighted average cost method
[Ans: a. Rs. 405, Rs. 325; b. Rs. 410, Rs. 330; c. Rs. 708, Rs. 322; d. Rs. 407.20, Rs.
322.75]

Weighted Average Cost Method/Moving Average Method

Cost of goods available for sale
Weighted average cost per unit/Moving average price per unit =
Total unit available for sale
Total amount
Or,
Total units
22. Consider the following information:
Date Particulars Units Rate
June 1 Beginning Inventory 15 20
14 Sale 7
20 Purchase 10 21
26 Sale 10
28 Sale 3
30 Purchase 10 22
Assume the company follows weighted average cost method in perpetual system.
Required: (a) Cost of goods sold (b) Ending inventories

Store Ledger (WAM)

Receipts Issued Balance
Date Particulars
Qty. Rate Amount Qty. Rate Amount Qty. Rate Amount
June 1 Balance b/d 15 20 300
June 14 Sale _ _ _ 7 20 140 8 20 160
June 20 Purchase 10 21 210 _ _ _ 18 20.55 370
June 26 Sale _ _ _ 10 20.55 205.5 8 20.55 164.4
June 28 Sale _ _ _ 3 20.55 61.65 5 20.55 102.75
June 30 Purchase 10 22 220 _ _ _ 15 21.52 322.75
20 407.15 15 322.75
Cost of goods sold = 20 units of Rs. 407.15
Ending Stock = 15 units of Rs. 322.75

23. Stores transactions of Khaptad company Ltd. for the month of January 2021 are
given below:
Date Particulars Units Unit Cost
Jan 1 Opening stock 100 Rs. 20
Jan 5 Purchase 200 25
Jan 10 Sales 250
Jan 15 Purchase 300 30
Jan 20 Sales 200
Jan 25 Purchase 400 35
Jan 30 Sales 300
Required: Calculate cost of goods sold and value of ending inventory for each for the
following two methods assuming that the company uses a perpetual inventory
system:
(a) Simple average method (b) Moving average method/Weighted average method
[Ans: a. COGS: Rs. 20,875 and EV: Rs. 9,125 b. COGS: Rs. 21,656 and EV: Rs. 8,344]

24. Stores transactions of Lumbini Company Ltd. for the month of Baishakh 2077 are
given below:
Date Particulars Units Unit Cost
Baishakh 1 Beginning inventory 200 Rs. 10
Baishakh 4 Sales 100
Baishakh 6 Purchase 200 12
Baishakh 8 Purchase 300 14
 Baishakh 15 Sales 200
Baishakh 22 Sales 250
Baishakh 25 Purchase 150 16
Required: Calculate cost of goods sold and value of ending inventory for each of the
following two methods assuming that the company uses a perpetual inventory
system:
(a) Simple average method (b) Moving average method/Weighted average method
[Ans: a. COGS: Rs. 6,650 and EV: Rs. 4,350 b. COGS: Rs. 6,700 and EV: Rs. 4,300]

Periodic Inventory System

In a periodic system, the inventory account is not updated each time when a sell or
purchase is made. A company using the periodic system must physically count the
units of inventory on hand at the end of the period.

25. The following are the store transactions for the month of January, 2021
Magh 1: Opening Stock 400 units @ Rs. 10
Magh 8: Purchased: 200 units @ Rs. 15
Magh 10: Sale 300 units
Magh 12: Purchased 500 units @ Rs. 20
Magh 20: Sale: 200 units
Magh 25: Purchased: 250 units @ Rs. 22
Magh 30: Sale: 150 units
Assume the company follows periodic system.
Required: Cost of goods sold and ending inventory under:
(a) Simple average method (b) Weighted average method (c) FIFO method (d) LIFO
method

Calculation of Cost of goods available for Sales (Opening stock + Purchase)

Date Particulars Qty (Units) Rate Amount
Magh 1 Opening stock 400 10 4,000
Magh 8 Purchase 200 15 3,000
Magh 12 Purchase 500 20 10,000
Magh 25 Purchase 250 22 5,500
Available for Sale 1,350 22,500
 Total Sales units = 300 + 200 + 150
= 650 units
Ending Stock (Closing stock) = Available – Sales
= 1,350 – 650
= 700 units
1) Under Simple Average Method
Total of different rates
Simple Average rate =
No . of rates
10+15+20+22
= 4
67
= 4 = Rs. 16.75
Cost of goods sold = Sales units x SAR
= 650 x 16.75 = Rs. 10,887.5
Ending Stock = Ending units x SAR
= 700 x 16.75 = Rs. 11,725

2) Weighted (Moving) Average Cost Method

Cost of goods available for Sales
Weighted average cost per unit (WACPU) =
Units available for Sales
Or
Total Amount
= Total units
22,500
= 1,350
= Rs. 16.67
Cost of goods sold = Sales units x WACPU
= 650 x 16.67 = Rs. 10,835.5
Ending Stock = Ending units x WACPU
= 700 x 16.67 = Rs. 11,669

3) FIFO Method
Cost of goods sold Calculation (Sales = 650 units)
Date Particulars Qty (Units) Rate Amount
Magh 1 From Opening Stock 400 10 4,000
Magh 8 From Purchase 200 15 3,000
Magh 12 From Purchase 50 20 1,000
 650 8,000
Ending Stock Calculation (Ending Stock = 700 units)
Date Particulars Qty (Units) Rate Amount
March 12 Purchase 450 20 9,000
March 25 Purchase 250 22 5,500
700 14,500

4) LIFO Method
Cost of goods sold calculation (Sales = 650 units)
Date Particulars Qty (Units) Rate Amount
Magh 25 From Purchase 250 22 5,500
12 From Purchase 400 20 8,000
COGS 650 13,500
Ending Stock Calculation (Ending = 700 units)
Date Particulars Qty (Units) Rate Amount
Magh 1 Purchase 400 10 4,000
Magh 8 Purchase 200 15 3,000
Magh 12 Purchase 100 20 2,000
Closing Stock 700 9,000

26. The following are the store transactions for the month of January, 2021
Magh 1: Opening Stock 500 units @ Rs. 12
Magh 8: Purchased: 300 units @ Rs. 14
Magh 10: Sale 400 units
Magh 12: Purchased 400 units @ Rs. 16
Magh 20: Sale: 300 units
Magh 25: Purchased: 200 units @ Rs. 18
Magh 30: Sale: 200 units
Assume the company follows periodic system.
Required: Cost of goods sold and ending inventory under:
(b) Simple average method (b) Weighted average method (c) FIFO method (d) LIFO
method

27. Fish-Tail Company made the following purchase of product X in its first year of
operation.[BBA 2020]
Units Total Cost
January 1, opening Inventory 1400 Rs. 10,360
March 30, 1200 8,400
June 15 2400 18,240
December 20 1800 14,400
Total 6800 51,400
The company uses a periodic inventory system. On December 31, physical count
disclosed that 2400 units of product X remained in inventory.
Required: (a) Simple average method (b) Weighted average method (c) FIFO method
(d) LIFO method
Periodic System
Calculation of Cost of goods available for Sales (Opening Stock + Purchase)
Date Particulars Qty (Units) Rate Amount
January 1 Opening Stock 1400 7.4 10,360
March 30 Purchase 1200 7 8,400
June 15 Purchase 2400 7.6 18,240
December 20 Purchase 1800 8
Available for Sales 6800 51,400
Ending units = 2400 units (remained)
Sales units = Available = 6800 – 2400
= 4400 units (sold)

1) Simple Average Method:

7.4+7+7.6 +8
Simple average rate =
4
=Rs. 7.5
Ending Stock = 2400 x 7.5 = Rs. 18,000
COGS = 4400 x 7.5 = Rs. 33,000
2) Weighted (Moving) Average method:
COGAFS
Weighted average cost per unit =
UAFS
Or,
Total Amount
=
Total Units
51400
=
6800
= Rs. 7.56
Ending Stock = 2400 x 7.56
= 18,144
COGS = 4400 x 756 = 33,264
3) Under FIFO Method
Cost of goods sold (Goods Sold = 440 units)
COGS = 4400 units of Rs. 32440
Ending Stock = Cost of goods available for Sales – COGS
= 51,400 – 32440
= 18,960
Or,
 Date Qty (Units) Rate Amount
June 15 600 7.6 4560
Dec. 20 1800 8 14400
2400 18960
Ending Stock = 2400 units of Rs. 18,960

4) Under LIFO method: COGS (Goods Sold = 4400)

Date Qty (Units) Rate Amount
Dec 20 1800 8 14,400
June 15 2400 7.6 18,240
Mar 30 200 7 1,400
4400 34,040
COGS = 4400 units of Rs. 34,040
Ending Stock = COAGFS – COGS
= 51400 – 34040 = Rs. 17,360

28. The following information is available concerning the inventory of Narayan Traders:
Units Unit Cost
January 1 200 Rs. 10
Purchases:
March 5 300 11
June 12 400 12
August 23 250 13
October 2 150 15
During the year, Narayan sold 1,000 units. It uses a periodic inventory system.
Required: Calculate cost of goods sold and value of ending inventory for each of the
following four methods:
(a) FIFO (b) LIFO (c) Weighted average (d) Simple average
[Ans: a. COGS: Rs. 11,400; EV: Rs. 4,200 b. COGS: Rs. 12,500; EV: Rs. 3,100 c.
COGS: Rs. 12,000; EV: Rs. 3,500 d. COGS: Rs. 12,200; EV: Rs. 3,400]