Match each inventory scenario or accounting adjustment in the final accounts of a sole trader with its correct accounting rule, concept, or financial statement effect.
- Valuing stock at net realizable value when selling price less completion/selling costs is less than cost priceApplication of the prudence concept to prevent anticipation of profits and overstatement of assets
- Overstatement of the closing inventory figure at the end of the accounting periodUnderstatement of cost of goods sold resulting in an artificial overstatement of gross profit
- Carriage inwards incurred on stock brought into the business premises during the periodAdded to purchases in the Trading Account to determine total cost of goods available for sale
- Double entry presentation of closing inventory in the final financial statementsCredited/deducted in the Trading Account to calculate cost of sales and debited as a Current Asset in the Balance Sheet
Cevap
Valuing stock below cost matches the prudence concept. Overstating closing inventory matches understatement of COGS and overstatement of gross profit. Carriage inwards matches being added to purchases in the Trading Account. Presentation of closing inventory matches deduction in the Trading Account and inclusion under Current Assets in the Balance Sheet.
Each item accurately aligns with core accounting rules under JAMB UTME guidelines: lower of cost and NRV satisfies prudence; closing stock deductions directly impact COGS and gross profit; carriage inwards increases purchase costs in trading accounts; and closing stock appears as both a deduction from available goods in trading and a current asset in the balance sheet.
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Anahtar Kavram
Valuation and Treatment of Inventory in Final Accounts