Inventory of finished goods
This query is : Resolved
24 November 2024
WHICH ACCOUNTS ARE CREDITED WHILE DEBITING INVENTORY(finished goods and work in progress)ACCOUNTS.
Furthermore in the credited accounts the expenses towards inventory will get reduced the why is the need to show change in inventory of finished goods and work in progress in P&L
Furthermore in the credited accounts the expenses towards inventory will get reduced the why is the need to show change in inventory of finished goods and work in progress in P&L
24 November 2024
Finished Goods Account is typically credited when goods are sold, written off, or moved to a lower-value account.
Work in Progress Account is credited when the goods are transferred to Finished Goods or when costs are settled (materials, labor, overhead).
Work in Progress Account is credited when the goods are transferred to Finished Goods or when costs are settled (materials, labor, overhead).
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24 November 2024
Basically my question is let’s take an example we started a business by 100000 Rs and this 100000rs is converted into finished good inventory. Now at the end of year we have inventory of 100000. So
Inventory Dr
To raw material Cr
To employee benefit Cr
To electricity Cr
This entry will pass.
Now the credit entry will nullify the expenses related to the product made.
But in statement of P&L under change in inventory Rs 100000 will be shown which is incorrect. Which is the wrong step
Inventory Dr
To raw material Cr
To employee benefit Cr
To electricity Cr
This entry will pass.
Now the credit entry will nullify the expenses related to the product made.
But in statement of P&L under change in inventory Rs 100000 will be shown which is incorrect. Which is the wrong step
24 November 2024
You started the business with Rs. 100,000, which was converted into finished goods inventory.
At the end of the year, you have Rs. 100,000 in inventory.
The inventory transactions in terms of raw material, employee benefits, and electricity costs are credited to remove the expenses that have been capitalized into inventory.
When the raw materials, employee benefits, and electricity are used in production, they are capitalized as part of the inventory.
Inventory Dr 100000
To Raw Material Cr 50000
To Employee Benefit Cr 30000
To Electricity Cr 20000
At the end of the year, you have Rs. 100,000 in inventory.
The inventory transactions in terms of raw material, employee benefits, and electricity costs are credited to remove the expenses that have been capitalized into inventory.
When the raw materials, employee benefits, and electricity are used in production, they are capitalized as part of the inventory.
Inventory Dr 100000
To Raw Material Cr 50000
To Employee Benefit Cr 30000
To Electricity Cr 20000
24 November 2024
Unless you sell any of finished goods, your P&L account nullifies due to capitalization of expenses. So the Balance sheet will reflect your investment against equal amount of finished goods.
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