04-16-2009, 11:16 PM
Dear Faraz
Under the perpetual system the Inventory account is constantly (or perpetually) changing. When a retailer purchases merchandise, the retailer debits its Inventory account for the cost; when the retailer sells the merchandise to its customers its Inventory account is credited and its Cost of Goods Sold account is debited for the cost of the goods sold. Accounting coaches disregard to use this system in the manufacturing industry. It is adviseable in the trading business where price fluctuates at minimum.
secondly you are misunderstanding weighted average. Weighted Average Divides the total cost of all by the total number of units. so you are in the spread sheet using moving average rather exponential moving average.
Suppose have made transactions in a day at different times at the rate you provided in the spread sheet. obviously your cost of sales vary in a day at different times and at the end of day result would be different.
Value of your closing stock is higer meaning that your gross profit is higher. More over if we add closing stock in cost of sales, it do not agree with purchase value and visa versa.
Your presentation in the spread sheet also differ from the Benchmark treatment under IAS 2.
So In my opinion you should reconsider your spread sheet.
wasim
Under the perpetual system the Inventory account is constantly (or perpetually) changing. When a retailer purchases merchandise, the retailer debits its Inventory account for the cost; when the retailer sells the merchandise to its customers its Inventory account is credited and its Cost of Goods Sold account is debited for the cost of the goods sold. Accounting coaches disregard to use this system in the manufacturing industry. It is adviseable in the trading business where price fluctuates at minimum.
secondly you are misunderstanding weighted average. Weighted Average Divides the total cost of all by the total number of units. so you are in the spread sheet using moving average rather exponential moving average.
Suppose have made transactions in a day at different times at the rate you provided in the spread sheet. obviously your cost of sales vary in a day at different times and at the end of day result would be different.
Value of your closing stock is higer meaning that your gross profit is higher. More over if we add closing stock in cost of sales, it do not agree with purchase value and visa versa.
Your presentation in the spread sheet also differ from the Benchmark treatment under IAS 2.
So In my opinion you should reconsider your spread sheet.
wasim
