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Stock Control
UNIT 3 CH 8
| Question | Answer |
|---|---|
| stock card | - subsidiary record that records each individual transaction involving the movement in and out of the business of a particular line of stock ____ includes: details of item, description of item, location, code, size/colour |
| stocktake | physical count of the number of units of each line of stock on hand ____ verifies the accuracy of stock cards and in the process detects andy stock loss/gain |
| Cost of Goods Sold | costs incurred in getting goods into a condition and location ready for sale____ can be larger than COS as it may include: customs duty/import duties, freight in/deliver from suppliers, modifications, packaging, |
| FIFO | the assumption that stock purchased first will be sold first |
| EXPLAIN - FIFO and effect is has on acc eq in times of rising prices | FIFO assumes older cheaper stock is sold first. it is possible some older stock is still on hand. this understated COS and overstates Net profit and OE. it assumes newer more expensive stock is still on hand, overstated Stock control and assets. |
| stock loss | expense, value at earliest stock cost price (FIFO) |
| stock gain | revenue, value at lowest stock on hand cost price (conservatism) |
| PAGE 180 GREAT STUFF! | |
| stock | goods purchased by a trading firm for the purpose of resale at a profit |
| why is stock important? | main source of rev and one of most sig assets |
| why is stock vulnerable? | susceptible to damage, theft, spoilage and change in fashion/taste |
| trading firm: | firm that purchases goods in order to resell at a profit |
| perpetual system of stock recording | involves recording individual stock transactions in the stock cards as they occur, then conducting a physical stock take at the end of the reporting period to verify the balances of those stock cards (detect stock loss/gains) |
| benefits of perpetual system of stock recording: | reordering of stock is assisted by maintaining a continuous record of no. units of stock on hand____stock losses/gains can be detected____fast and slow moving lines of stock can be identified so that stock can be rotated or stock mix adjusted. |
| EXPLAIN: - relationship between the Stock Control account and the stock cards. | Stock cards record all details of stock movements in and out of the business, relating to individual lines of stock. The stock Control account summarises all transactions affecting stock. |
| EXPLAIN: - GST does not affect the valuation of a stock purchase. | because it does not affect revenue earned from stock. Instead, the GST is an additional amount collected or paid on behalf of the ATO and will only affect the GST owed to the ATO. It increases amount owed to debtors or owed to creditors. |
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