Perpetual Inventory: sales/purchase returns?

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Dear Fraz,

Following two things are separate from other.

1. Inventory System
2. Costing methods

<b>INVENTORY SYSTEM</b>

Two methods of maintaining Inventory in practice are given below;

<b>Perpetual Inventory System</b>

This is the system in which all purchases and issues are recorded when the transaction is occurred and accordingly balance is updated at each day-end regularly. Companies use this system.

<b>Periodic Inventory System
</b>
Purchases and issues are updated, may be on weekly, monthly basis or annually on periodic or random basis or as per requirement.

<b>COSTING METHODS
</b>
There three methods of costing and can be used under perpetual inventory system as well as under periodic inventory system.

1. First-in-first out (FIFO)
2. Last-in-first out (LIFO)
3. Moving Average Method.

I think you would well aware of above costing methods. IAS-2 has abolished the LIFO method therefore; other two methods are used for calculating cost of goods sold (costing).

Now, returning to your question, purchase or sale return should be recorded / updated in the store card by using the rate on which purchase or sale (issue) was originally done.

The excel document is need to customize for this purpose but the principal should be followed that all returns should be recorded by using the rate on which the transaction was actually executed.



Regards,

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