To describe LIFO & FIFO stock valuation tools.

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Presentation transcript:

To describe LIFO & FIFO stock valuation tools. UNIT TITLE: Unit 2: Accounts & Finance LESSON TITLE: Balance Sheet COMPETENCY FOCUS: Key Skills (L5): you will be able to develop your numeracy skills to calculate financial transactions of a business and to interpret financial data. Success Criteria By the end of the lesson, you should be able to… To describe LIFO & FIFO stock valuation tools. To calculate LIFO & FIFO stock valuation tools from given information

I can recognise the layout of the Balance Sheet, input data correctly and explain what the figures show: Competence level Descriptor Autonomous I can delve deeper into my calculations by fully explaining how my calculations explain the financial state of the business and I will evaluate how effective/ineffective their business activities have been for the organisation and make justified recommendations for improvement. Advanced As below but additionally I can use my calculations to begin to analyse the activities of my focus organisation and recommend strategies for improvement. Strong As below but additionally I can fully explain what the calculations show and explain the financial state of the business. Regular I can correctly input data into a balance sheet, calculate totals and then begin to explain what the calculations show. Guided Through basic calculations, I can input data correctly into a balance sheet.

Depreciation (HL) Depreciation: the decline in the value of a non-current asset over time. Assets decline in value because: Normal wear and tear Obsolete technology

Depreciation (HL) Straight-line method: Annual depreciation change = Original cost of asset/expected life of asset - Now complete task on pg. 221

Depreciation (HL) Reducing balance method: 1- √residual value/cost x100 - Now complete task on pg. 222

Stock Valuation The value of closing stock figure on the balance sheet is important because: It shows the value of the company How much profit is made.

LAST IN FIRST OUT (LIFO) LIFO: Valuing closing stocks by assuming that the last one purchased was sold first.

FIRST IN FIRST OUT (FIFO) FIFO: Valuing closing stocks by assuming that the first ones bought in were sold first.

TASK Complete ‘worked examples’ on pg. 222/223.

Fixed Assets Vs Current Assets Fixed Assets: Assets that are owned and are expected to be kept for more than 1 year or many years. Current Assets: Assets that can be converted in to cash more easily and are only retained for less than 1 year. These are listed in order of liquidity (easiest to convert in to cash)

Current Liabilities Current liabilities are bills the firm has to pay soon (within 1 year) Included in current liabilities are: -creditors (money owed to suppliers for stock) - Corporation tax (to Government) - Unpaid dividends to shareholders

Current Assets Net Current Assets(working capital) = Current Assets – Current Liabilities Net assets (what the company is worth) = Net current assets + fixed assets

TASK 1 Complete ‘Big Tasty Burger’ Case Study [40mins]

TASK 2 Complete ‘The Biscuit Factory’ Case Study [40mins]

TASK 3 Use the revision guidance notes to produce your own revision notes ready for the exam! [40mins]