9.8 Stock Cards

VCE Accounting Unit 3. Video of this presentation can be found on my YouTube channel here https://www.youtube.com/channel/UCf5jyuJoYwie8tWfvjEc0zg.

1. 9.8 Stock cards

2. In order for the Perpetual I nventory S ystem to work, a Stock C ard must be used. Made up of four sections: 9.8 Stock cards Stock item: iPad 2 Date Reference 1 Jun Balance 13 Jun Invoice 46 15 Jun Receipt 19 17 Jun Receipt 28 24 Jun Invoice 47 29 Jun Receipt 72 IN Qty Cost Value       40 200 8000 20 200 4000 OUT Qty Cost Value       5 200 1000 7 200 1400 3 200 600 BALANCE Qty Cost Value 10 200 2000 50 200 10000 45 200 9000 38 200 7600 58 200 11600 55 200 11000 Details Records details of the stock and transactions IN Column Records all stock coming into the business when bought from suppliers OUT Column Records all stock leaving the business through sales BALANCE Column How much stock is left, its cost and total value

3. In reality, businesses buy stock at different costs . For example, JB Hi-Fi might buy iPads from Apple for $200 one day, but next week the price goes up to $210 Stock item: iPads IN OUT BALANCE Date Reference Qty Cost Value Qty Cost Value Qty Cost Value 1 Jun Invoice 11 5 200   1000       5 200 1000 13 Jun Invoice 46 30 210 6300 5 200 1000 30 210 6300 On June 1 st JB Hi-Fi buys 5 iPads from Apple for $200 each Stock item: iPads IN OUT BALANCE Date Reference Qty Cost Value Qty Cost Value Qty Cost Value 1 Jun Invoice 11 5 200   1000       5 200 1000 13 Jun Invoice 46 30 210 6300 5 200 1000 30 210 6300 On June 1 st JB Hi-Fi buys 30 iPads from Apple for $210 each Stock item: iPads IN OUT BALANCE Date Reference Qty Cost Value Qty Cost Value Qty Cost Value 1 Jun Invoice 11 5 200   1000       5 200 1000 13 Jun Invoice 46 30 210 6300 5 200 1000 30 210 6300 9.8 Stock cards

4. What happens now if a customer comes in and buys 6 units ? How should the cost of the units be determined? All 6 units cost $200 ? All 6 units cost $210 ? 3 units cost $200 and 3 units cost $ 210 ? 5 units cost $200 and 1 unit costs $ 210 ? The answer is to use the First in First Out (FIFO) system Stock item: iPads IN OUT BALANCE Date Reference Qty Cost Value Qty Cost Value Qty Cost Value 1 Jun Invoice 11 5 200   1000       5 200 1000 13 Jun Invoice 46 30 210 6300 5 200 1000 30 210 6300 9.8 Stock cards

5. The business will use 1 Stock Card for every line of stock it sells, e.g. Smart Phones at JB Hi-Fi Stock item: iPhone IN OUT BALANCE Date Reference Qty Cost Value Qty Cost Value Qty Cost Value 1 Aug Balance             15 200 3000 Stock item: Galaxy IN OUT BALANCE Date Reference Qty Cost Value Qty Cost Value Qty Cost Value 1 Aug Balance             10 150 1500 Stock item: HTC IN OUT BALANCE Date Reference Qty Cost Value Qty Cost Value Qty Cost Value 1 Aug Balance             20 10 2000 9.8 Stock cards

6. At the end of the period, the balance of the Stock Control Ledger account must equal the total stock on hand indicated in the Stock Cards Stock Control [A] 1 Aug Balance 6500 Checking mechanism The total of all Stock Cards must total the Stock Control Ledger account Stock item: iPhone IN OUT BALANCE Date Reference Qty Cost Value Qty Cost Value Qty Cost Value 1 Aug Balance             15 200 3000 Stock item: Galaxy IN OUT BALANCE Date Reference Qty Cost Value Qty Cost Value Qty Cost Value 1 Aug Balance             10 150 1500 Stock item: HTC IN OUT BALANCE Date Reference Qty Cost Value Qty Cost Value Qty Cost Value 1 Aug Balance             20 10 2000 Stock Control [A] 1 Aug Balance 6500 9.8 Stock cards

7. The link between the Stock Control Ledger and Stock Cards General Ledger Stock Cards Subsidiary Record A summary of total inventory Totals of journals are posted periodically (at end of period ) No individual details of stock items or each transaction A series of individual records (one Stock Card for each item of inventory) Not part of double-entry Updated continuously throughout the period (on day of actual transaction ) Stock Control Ledger Stock Control [A] Stock item: IN OUT BALANCE Date Reference Qty Cost Value Qty Cost Value Qty Cost Value 9.8 Stock cards

8. A Schedule of Stock Cards can be prepared in the same way as a Debtors Schedule or Creditors Schedule Inventory description Product code Quantity Cost Value Stock item: iPhone IN OUT BALANCE Date Reference Qty Cost Value Qty Cost Value Qty Cost Value 1 Aug Balance             15 200 3000 Stock item: Galaxy IN OUT BALANCE Date Reference Qty Cost Value Qty Cost Value Qty Cost Value 1 Aug Balance             10 150 1500 Stock item: HTC IN OUT BALANCE Date Reference Qty Cost Value Qty Cost Value Qty Cost Value 1 Aug Balance             20 100 2000 Inventory description Product code Quantity Cost Value Apple iPhone A-001 15 200 3000 Inventory description Product code Quantity Cost Value Apple iPhone A-001 15 200 3000 Samsung Galaxy S-003 10 150 1500 Inventory description Product code Quantity Cost Value Apple iPhone A-001 15 200 3000 Samsung Galaxy S-003 10 150 1500 HTC H-008 20 100 2000 Inventory description Product code Quantity Cost Value Apple iPhone A-001 15 200 3000 Samsung Galaxy S-003 10 150 1500 HTC H-008 20 100 2000 Balance of Stock Control Ledger 6500 9.8 Stock cards

9. Advantages of using a Stock Control Ledger and Stock Cards : Greater stock control – the firm knows how much stock it has at any one time of each type of inventory so it can make better decisions about when to re-order and in what quantity Slow-moving and fast-moving stock can be identified – continuous records in the Stock Card give the firm precise information on which stock is selling well and which stock is not selling and shouldn’t be sold anymore Re-ordering of stock is efficient – the firm can identify a set re-order point (e.g. 5 units) and re-order more stock as soon as this limit is reached Checking mechanism – an in-built checking mechanism exists as the total of the Stock Control ledger must balance to the total value of all Stock Cards . 9.8 Stock cards

10. task In-class Homework SQ13 X SQ14 X