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IAS 2
COGS (P/L)
Inventory (SFP)
Inventory
Processing
System:
Periodic vs
Perpetual
Inventory
Cost Flows:
Specific
Identification
or
FIFO, LIFO,
WeightedAverage
Cost of
Goods
available
for Sale
Cost of
Goods
Sold
(COGS)
Inventory
Valuation:
Ending
Inventory
Lower of Cost
and Net
Realisable
Value
Definition of Inventory
Inventory
Trading
Merchandise
Manufacturing
Raw Materials
Work-inProgress
Finished
Product
Perpetual
Periodic
Perpetual
Dr Purchases E+
Cr Cash A- /Payables L+
[Purchase of inventory]
Dr Inventory A+
Cr Cash A- /Payables L+
[Purchase of inventory]
Periodic
Perpetual
Dr Cash/Receivables A+
Cr Sales I+
[Sale of inventory]
Dr COGS E+
Cr Inventory ADr Cash/Receivables
Cr Sales
[Sale of inventory]
Periodic
Tan Soon Huat:
COGS = OI + P CI
Dr COGS / (P/L)
Cr Inventory
[Transfer Opening Inventory to
P/L]
Perpetual
Fundamental
Principle of IAS 2:
LOWER OF:
Cost
Interchangeable
Items
FIFO
First-In-First-Out
AVCO
Average Cost
(weighted)
Net Realisable
Value
(NRV)
Noninterchangeable
Items
Specific
Identification
Invoice
Cost
Manufacturing
Overheads
Import
Duties /
Taxes
Delivery /
Freight
Storage of
raw
materials
and WIP
production
selling costs
storage costs of finished goods
Fundamental
Principle of IAS 2:
LOWER OF:
Cost
Interchangeable
Items
FIFO
First-In-First-Out
AVCO
Average Cost
(weighted)
Net Realisable
Value
(NRV)
Noninterchangeable
Items
Specific
Identification
Inventory cost is calculated using specific identification basis for gemset jewellery and watches, and weighted average for other inventories.
Fundamental
Principle of IAS 2:
LOWER OF:
Cost
Interchangeable
Items
FIFO
First-In-First-Out
AVCO
Average Cost
(weighted)
Net Realisable
Value
(NRV)
Noninterchangeable
Items
Specific
Identification
Prudence Concept
Cost
NRV
Less:
Trade Discounts
Estimated costs to completion
NRV $225
= $8 453
discount
Cost $3 800 >
NRV $3 040
= $23 990