The Stock Ledger, Worked
Chapter Sixteen
Syllabus topic 4, "Methods of Inventory Accounting and Prepare Stock Ledger/ Account"
Pages 43 to 44 of 82
How this question is marked
Three columns, each with quantity, rate and value: receipts, issues, balance. A ledger with only values cannot be followed.
Carry the balance forward on every line, including the lines where nothing happens to it.
Under weighted average, show the new rate on the receipt line. That is where it changes, and a marker looks for it.
Prove the ledger at the end. Opening plus receipts must equal issues plus closing stock. It is one line and it catches almost every arithmetic slip.
The question
The following relate to material X for April 2027.
| Date | Transaction | Units | Rate, Rs |
|---|---|---|---|
| 1 April | Opening balance | 200 | 20 |
| 5 April | Purchased | 300 | 25 |
| 10 April | Issued | 250 | |
| 18 April | Purchased | 250 | 27 |
| 25 April | Issued | 300 |
Prepare the stock ledger under the first in first out method and under the weighted average method, and compare the results.
Method 1: first in first out
| Date | Receipts | Issues | Balance | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Qty | Rate | Value | Qty | Rate | Value | Qty | Rate | Value | |
| 1 Apr | 200 | 20 | 4,000 | ||||||
| 5 Apr | 300 | 25 | 7,500 | 200 | 20 | 4,000 | |||
| 300 | 25 | 7,500 | |||||||
| 10 Apr | 200 | 20 | 4,000 | ||||||
| 50 | 25 | 1,250 | 250 | 25 | 6,250 | ||||
| 18 Apr | 250 | 27 | 6,750 | 250 | 25 | 6,250 | |||
| 250 | 27 | 6,750 | |||||||
| 25 Apr | 250 | 25 | 6,250 | ||||||
| 50 | 27 | 1,350 | 200 | 27 | 5,400 |
The 10 April issue of 250 units is priced in two parts: the whole of the opening 200 at Rs 20, then 50 from the 5 April lot at Rs 25. That is what first in first out means, and splitting the issue is the technique.
The 25 April issue likewise takes the remaining 250 at Rs 25 and 50 from the new lot at Rs 27.
Proof of the FIFO ledger.
| Particulars | Amount, Rs |
|---|---|
| Cost of issues on 10 April, being 4,000 plus 1,250 | 5,250 |
| Cost of issues on 25 April, being 6,250 plus 1,350 | 7,600 |
| Closing stock, 200 units at Rs 27 | 5,400 |
| Total, being opening stock plus purchases | 18,250 |
Method 2: weighted average
| Date | Receipts | Issues | Balance | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Qty | Rate | Value | Qty | Rate | Value | Qty | Rate | Value | |
| 1 Apr | 200 | 20.00 | 4,000 | ||||||
| 5 Apr | 300 | 25 | 7,500 | 500 | 23.00 | 11,500 | |||
| 10 Apr | 250 | 23.00 | 5,750 | 250 | 23.00 | 5,750 | |||
| 18 Apr | 250 | 27 | 6,750 | 500 | 25.00 | 12,500 | |||
| 25 Apr | 300 | 25.00 | 7,500 | 200 | 25.00 | 5,000 |
The rate changes only on the two receipt lines. On 5 April, Rs 11,500 over 500 units is Rs 23.00. On 18 April, Rs 12,500 over 500 units is Rs 25.00.
The 10 April issue does not change the rate. It removes 250 units and Rs 5,750 of value, which is exactly Rs 23.00 a unit, so the balance stays at Rs 23.00. That is why the average is recomputed after receipts and never after issues.
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