Account for inventory
Hello, Ive been trying to figure this out for ages and all the demonstrations I ve seen have been simple rounded numbers. I m new to accounting and can t get my head around this at all, any help would be appreciated.
Having a blank inventory, I make a purchase of £93.83.
Net £72.20
Shipping £5.99
VAT £15.64
Not being VAT registered would the total purchase be made with or without the VAT?
The purchase was for 50 t-shirts, 40 at 1.47 excluding vat and 10 at 1.34 excluding vat. what would be DR and CR and for what amounts? It s really confusing me!
Thanks in advance.
Having a blank inventory, I make a purchase of £93.83.
Net £72.20
Shipping £5.99
VAT £15.64
Not being VAT registered would the total purchase be made with or without the VAT?
The purchase was for 50 t-shirts, 40 at 1.47 excluding vat and 10 at 1.34 excluding vat. what would be DR and CR and for what amounts? It s really confusing me!
Thanks in advance.
Comments
If NO VAT.
DR Purchases with 87.84
CR Creditors / PLCA or Bank 87.84
DR Carriage in 5.99
CR Creditors / PLCA or Bank 5.99
If VAT registered
Treat carriage in as above.
Dr Purchases 72.20
CR Creditors / PLCA or Bank 93.83
DR Purchase / Input VAT 15.64
Although both have the same net effect on COGS
I'm sorry I don't quite understand your question - if you expand a little I'll try to answer.
I'm watching this as this is how we want to do it, but as for our unit value it confuses me.
I'm still lost at the question.
Is this in relation to an exam question or are you just being inquisitive? If it's a question, post the question.
When you say 'unit value confuses me' which do you refer to?
Is it the calculation of the figures you're stuck at or the entries?
Basically what I was confused about but I think I've figured it out now.
Was when making a purchase of clothing different clothing comes and different rates per unit (per item of clothing) therefore how would that be show when debiting inventory and crediting it when a sale is made. But after doing some more digging I've come across FIFO and persific ID number which can relate the the unit cost per item of clothing to then Cr inventory and debit COGS correctly. Would that be correct?
FIFO and average cost are the usual methods.
Periodic method is also the usual, as an oppose to perpetual method.
For a full understanding, again it does depend what level you are on, look into IAS 2.