session 5 - inventories

7/24/2019 Session 5 - Inventories

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GAM: Acc ounting Ses si on 5: A pp lyin g A cc oun ting Pr ocedur es fo r In vento ries Sl id e

GOVERNMENT ACCOUNTING MANUA

(For National Government Agencies)




Session 5Applying Accounting Procedu

for Inventories




SESSION OVERVIEW

In this session we will discuss the recognitiomeasurement of inventories in accordance wi

Government Accounting Manual (GAM) an

cost formulas used, forms, reports, proced

accounting entries as well as the disc

requirements.




LEARNING OBJECTIVE

At the end of the session, you will be able to apthe policies, procedures, recording and reporting

inventories in accordance with the GAM, PPSAS

and the Revised Chart of Accounts.




KEY TERMS

Inventories

- assets in the form ofmaterials or supplies for

sale, for distribution, for

manufacturing and for

consumption

Semi-expendable prop

– tangible items with

estimated service life omore than one year no

within the capitalizatio

threshold of P15,000.00




Current replacementcost - is the cost theentity would incur to

acquire the asset on thereporting date.

Net Realizable Value

- is the estimated selling price l

the estimated costs of completand the estimated costs necessto make the sale, exchange,distribution.

KEY TERMS




Fair Value - is the amount for which anasset could be exchanged, or a liabilitysettled, between knowledgeable, willi

parties in an arm’s length transaction.

KEY TERMS




Exercise 5-A




ForManufacturing For Sale ForDistribution FCons

Classifications of Inventories




Example:

The Department of Education purchased an air-conditioning amounting to P13,000.00 for the use of their accounting offic

Accounting entry:

Semi- Expendable Office Equipment 10405020 13,000

Cash MDS, Regular 10104040 13,0

To recognize purchase of air-conditioning units on cash

Sample Accounting entries forSemi-Expendable Property



GAM: Acc ounting Ses s ion 5: A p pl yin g A cc oun ting Pr o cedur es fo r In v ento ries Sl id e

Accounting entry:

Semi-Expendable Mach & Equipt. Expense 50203210 13

Semi-Expendable Office Equipment 10405020 13

To recognize issuance of the air-conditioning unitsaccounting office





The Agency incurred repairs on the said air-conditioning unit afteamounting to P4,000.00.

Repairs & Maint.-Semi- Expendable Mach. & Equipt. 50213050 4,0

Cash MDS, Regular 10104040

To recognize repair of the air-condition unit.





Lower ofcost and net

realizablevalue

FV at thedate of

acquisition

Lowercost acurre

replacemcost

MEASUREMENT OF INVENTORIES

Non-exchangeInventories measured Held for distribution

charge or for a nom

charge




Exercise 5-B




a. Costs ofPurchase

Purchase price

Import dutiesand other taxes

Transport,handling and

other attributable

cost

b. Costs ofConversion

Direct labor

Materials and

Overhead

COST OF INVENTORIES




Example of costs excluded from the co

of inventories

wastedmaterials,labor, oroverhead

Storagecost

Administrativeoverheads

Sellco




METHODS OF ACCOUNTING FOR

INVENTORIES

Perpetual inventory•Continually records all the changes in inve

Periodic inventory

•All acquisition are recorded by debits topurchases




COST FORMULA

Specific identification cost

Weighted average method




Cost > Net RealizableValue

= ImpairmenLoss

Inventories Held for Sale




Inventories Held for Distribution Consumption

Cost > Current

Replacement

Cost

= Impairment L




For Sale

Impairment Loss –

Inventories xxxMerchandise Inventory xxx

To record impairment loss of merchandise inventories

Accounting Entry

Held for Consumption/Distribution

Impairment Loss –

Inventories xxxOffice Supplies Inventory xxx

Welfare Goods for Distribution xxx

To record impairment loss of office supplies inventory and welfare goods for distr




SoldExchanged or

distributedwrite-down

Loinve

EXPENSE




Exercise 5-C

Records Forms and




Records, Forms andReports

Stock Card

Supplies LedgerCard

Requisition and IssueSlip

Purchase Request

Purchase Order

Report ofSupplies and

MaterialsIssued

http://localhost/var/www/apps/conversion/tmp/scratch_7/forms/Appendix%2058%20-%20SC.xls

http://localhost/var/www/apps/conversion/tmp/scratch_7/forms/Appendix%2057%20-%20SLC.xls



http://localhost/var/www/apps/conversion/tmp/scratch_7/forms/Appendix%2063%20-%20RIS.xls



http://localhost/var/www/apps/conversion/tmp/scratch_7/forms/Appendix%2060%20-%20PR.xls


http://localhost/var/www/apps/conversion/tmp/scratch_7/forms/Appendix%2061%20-%20PO.xls


http://localhost/var/www/apps/conversion/tmp/scratch_7/forms/Appendix%2064%20-%20RSMI.xls










http://localhost/var/www/apps/conversion/tmp/scratch_7/forms/Appendix%2058%20-%20SC.xls




Records, Forms and Reports

Waste Materials Report

Report on thePhysical Count

Inventories

Inspection andAcceptance Repor

Report ofAccountability

for Accountable Forms

InventoryCustodian

Slip

http://localhost/var/www/apps/conversion/tmp/scratch_7/forms/Appendix%2065%20-%20WMR.xls


http://localhost/var/www/apps/conversion/tmp/scratch_7/forms/Appendix%2073%20-%20RPCPPE.xls




http://localhost/var/www/apps/conversion/tmp/scratch_7/forms/Appendix%2062-%20IAR.xls


http://localhost/var/www/apps/conversion/tmp/scratch_7/forms/Appendix%2067%20-%20RAAF.xls





http://localhost/var/www/apps/conversion/tmp/scratch_7/forms/Appendix%2059%20-%20ICS.xls











PROCEDURES IN THE RECEIPT, INSPECTION, ACCEPTANCEAND RECORDING DELIVERIES OF INVENTORY ITEMS

Supply Officer signs“Received” portion of

the DR and preparesIAR

Property inspectorinspects and verifies

Supply Officeacknowledge re

Accounting Div/unitprepares JEV

Supply Officerprepares DV

SLC Keeper ponecessary inform

to the SLC

Ill t ti E t i




Inventory Held for Manufacturing

1. Purchase of Raw Materials

Raw Materials Inventory 10403010

Cash Modified Disbursement System (MDS), Regular 10104040

2. Direct labor costs incurred in operations

Direct Labor 50401010


3. Applied Manufacturing Overhead

Manufacturing Overhead 50401020


Illustrative Entries





Inventory Held for Manufacturing

4. Transfer of raw materials, direct labor and manufacturing overhead to

production process

Work-in-Process Inventory 10403020

Raw Material Inventory 10403010

Direct Labor 50401010

Manufacturing Overhead 50401020

5. Transfer of completed units to finished goods

Finished Goods Inventory 10403030

Work-in-Process Inventory 10403020

6. Sale of Finished Goods

Cash-Collecting Officer 10101010

Sales Revenue 40202160

Cost of Sales 50402010

Finished Goods Inventory 10403030






Inventory Held for Consumption

1. Purchase of Food Supplies on account

Food Supplies Inventory 10404050

Accounts Payable 20101010

2. Payment for Food Supplies



3. Issuance/Consumption of Food SuppliesFood Supplies Expenses 50203050

Food Supplies Inventory 10404050






Inventory Held for Sale

1. Purchase of Inventories for Sale

Merchandise Inventory 10401010


2. Sell merchandise with sales discounts

Cash Collecting Officer 10101010

Sales Discounts 40202161

Sales Revenue 40202160

Cost of Sales 50402010







Inventory Held for Distribution

1. Purchase of goods for distribution on account

Welfare Goods for Distribution 10402020


2. Payments of goods purchased



3. Issuance/distribution of goods

Welfare Goods Expenses 50203060

Welfare Goods for Distribution 10402020






1. Impairment of Raw Materials Inventory

Impairment Loss - Inventories 50503070

Raw Materials Inventory 10403010

2. Impairment of Merchandise Inventory

Impairment Loss - Inventories 50503070



DISCLOSURES




DISCLOSURES

The accounting policies;

The total carrying amount in classificationsappropriate to the entity;

The carrying amount carried at fair

value less costs to sell;

The amount of inventories recognized asan expense during the period;

DISCLOSURES




The amount of any write-down of inventories

recognized as an expense in the period;

The amount of any reversal of any write down

The circumstances or events that led to the

reversal of a write-down of inventories;The carrying amount of inventories pledged as

for liabilities.

DISCLOSURES




Exercise 5-D




THANK YOU

and GOD BLESS

session 5 - inventories

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