1. Perpetual Inventory System By Denis 09.12.2008

2. Perpetual Inventory System Involves keeping current and continuous records of all inventory transactions Maintain  Quantity and unit cost for each sale/purchase  Running inventory balance

3. Perpetual System — Stock Card Minimum Stock 4 Maximum Stock 17 Item Shirt Code SH001 Purchases Sales Balance Unit Total Unit Total Unit Total Date Explanation Units cost cost Units cost cost Units cost cost 1/1 Beginning bal 4 650 2600 15/1 Purchases 10 650 6500 14 650 9100 21/1 Sales 3 650 1950 11 650 7150 23/1 Purch. Return (1) 650 (650) 10 650 6500 24/1 Sales Return (1) 650 (650) 11 650 7150

4. Perpetual Inventory System (cont’d) Single general ledger account for all inventory transactions Details maintained on inventory cards Inventory Increases (debits) Purchases Sales Returns Decreases (credits) Sales Purchase returns

5. Accounting Purchase OrderNo accounting GRNDr. Inventory A/c Cr. GRN Suspense A/c Cost of Purchase AP Invoice bookingDr. GRN Suspense A/c Dr/Cr. AP Invoice variance a/c Cr. Vendor Control A/c Value of Invoice Difference between Invoice and GRN should be accounted in AP Invoice Variance A/c Stock Issue for particular purpose Dr. Expense A/c Cr. Inventory A/c At the cost of inventory Stock TransferAt the time of OUT entry Dr. Stock in Transit A/c Cr. Inventory A/c At the time of IN entry Dr. Inventory A/c Cr. Stock in Transit A/c At the cost of Inventory

6. Accounting (contd…) SalesDr. Debtor A/c Cr. Sales A/c Dr. Cost of Goods Sold A/c Cr. Inventory A/c At Sale price recoverable from Customer At Cost price. Reduces the Inventory on hand Material Issue as Capex Dr. CWIP Cr. Inventory A/c At Cost price Return after GRNReverse of GRNAt the same rate at which original entries are booked Purchase Return after booking Invoice Dr. Vendor Suspense control a/c Cr. Inventory A/c At the rate billed by Vendor On confirmation about return by Vendor (case above) Dr. Vendor A/c Dr/Cr. Goods return Variance a/c Cr. Vendor Suspense control a/c On acknowledgement from Vendor about his acceptance Difference, if any, to be accounted Sales ReturnReverse above entriesAt the rate at which original entries were passed

7. Income Statement for the period ended 31 March Perpetual Inventory System Sales 3150 Less: Sales returns 1050 Net sales 2100 Cost of sales1720 GROSS PROFIT380 Perpetual Inventory System Sales 3150 Less: Sales returns 1050 Net sales 2100 Cost of sales1720 GROSS PROFIT380