Question 4.10: Suppose that a particular line of inventory had the followin...

Accounting for Business Students

Suppose that a particular line of inventory had the following transactions for a period.

Purchased 60 tonnes @ $20 per tonne

Sold 30 tonnes

Purchased another 30 tonnes at $22 per tonne

Sold 50 tonnes

The business uses FIFO as its way of dealing with inventory flow assumptions.

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This can be recorded in a modified stock account as shown below.

Inventory
Date	Debit—goods received			Credit—goods issued			Balance
	Quantity	Cost/unit	Total cost	Quantity	Cost/unit	Total cost	Quantity	Cost/unit	Total cost
	60	20	1,200				60	20	1,200
				30	20	600	30	20	600
							30	20	600
	30	22	660				30	22	600
				30	20	600
				20	22	440	10	22	220

The double entry to the debit side would be a credit to cash or (more likely) to creditors/payables. The double entry to the credit side would be a debit to the cost of sales account. All of these transactions would be journalised prior to posting in the accounts.

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