Acca financial Accounting (FA) Study Text ac ca (FA)

Illustration 2 – Recording inventory in the ledger accounts 

 

In TYU 1 Peter has opening inventory of $9,500 at the beginning of the 

year-ended 31 December 20X7. Peter's opening inventory ledger account 

would be presented as follows: 

Inventory

 

20X7 $ 

 

$ 

1 Jan Balance b/f 

9,500   

 

As inventory is an asset this is currently shown as a debit balance. 

At the end of the year the opening inventory must be removed from 

assets and the expense recognised, as follows: 

Dr Cost of sales $9,500 

Cr Inventory assets $9,500 

To provide a simple illustration of the effect of this adjustment a cost of 

sales T-account has been set up. This already includes the $150,000 of 

purchases made by Peter during the year. 

Inventory

 

20X7 $ 

 

$ 

1 Jan bal b/f 

9,500  Cost of sales 

9,500 

 

Cost of sales

 

20X7 $ 

 

$ 

Various purchases 

150,000   

 

Inventory 9,500