{"id":2907,"date":"2023-10-03T16:21:13","date_gmt":"2023-10-03T16:21:13","guid":{"rendered":"http:\/\/localhost\/ecole9ja\/?p=2907"},"modified":"2023-10-03T16:22:49","modified_gmt":"2023-10-03T16:22:49","slug":"week-8-to-10-ss2-first-term-book-keeping-notes","status":"publish","type":"post","link":"https:\/\/ecolebooks.com\/nigeria\/posts\/week-8-to-10-ss2-first-term-book-keeping-notes\/","title":{"rendered":"Week 8 to 10 – SS2 First Term Book Keeping Notes"},"content":{"rendered":"

WEEK EIGHT (8) TO TEN (10)
\n<\/strong>STOCK VALUATION
\n<\/strong>Methods of stocks valuation are devices which aim to deal with some of the problems. W shall consider some of those commonly adopted.
\n(I)\u00a0\u00a0\u00a0\u00a0FIRST-IN-FIRST OUT (FIFO) METHOD.
\n<\/strong>This method assumes as the name indicates that items of stock were sold during the year in the order in which they were originally bought. Goods that were bought first (FIRST-IN) were those that were sold first, or issued first for production (FIRST-OUT). It follows then that items of closing stock will be made up of those bought most recently.
\nExample:
\n<\/strong>A firm had a stock of 100 items at the beginning of an accounting year. The items were valued at N2.00 each purchases during the year were as follows.
\n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0N
\nJanuary 200 units at N3 each\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0600
\nJune \u00a0\u00a0\u00a0\u00a0 300 units at N4 each\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 1,200
\n\"\"\/\"\"\/\"\"\/\"\"\/Dec. 100 units at N5 each\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0500
\n\u00a0\u00a0\u00a0\u00a0 300\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 2,300
\n500 units were sold during the year for N3,500. Find
\n(a)\u00a0\u00a0\u00a0\u00a0The value of closing stock of goods and
\n(b)\u00a0\u00a0\u00a0\u00a0The cost of goods sold.
\nIf FIFO method of valuing closing stock is used.<\/p>\n

\u00a0SUGGESTED SOLUTION
\n<\/strong>(a)\u00a0\u00a0\u00a0\u00a0Value of closing stock
\nSince the FIFO method of valuation is used, the closing stock of 200 units is made up of items bought most recently. Hence
\n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0N
\n100 units bough in June at N4 each\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0400
\n\"\"\/\"\"\/\"\"\/100 units bought in Dec. at N5 each\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0500
\n\"\"\/200 units of stock at end has a value of\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0900
\n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0(b)\u00a0\u00a0\u00a0\u00a0Cost of goods sold
\nUnder FIFO, goods are deemed to be sold in the order in which the items bought first being sold first. Hence
\n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0N
\n100 units sold from opening stock cost N2 each\u00a0\u00a0\u00a0\u00a0200
\n200 units sold from January purchases N3 each\u00a0\u00a0\u00a0\u00a0600
\n\"\"\/\"\"\/\"\"\/200 units sold from June purchases cost N4 each\u00a0\u00a0\u00a0\u00a0800
\n\"\"\/500\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 1,600
\n(II)\u00a0\u00a0\u00a0\u00a0LAST-IN-FIRST OUT (LIFO) METHOD.
\n<\/strong>This takes the opposite view to the FIFO method and assumes that goods sold during the period are first taken from those most recently purchased. On the basis of this assumption, the closing stock of goods is taken to comprise items bought first.
\nExample:
\n<\/strong>Same as under FIFO
\nSUGGESTED SOLUTION
\n<\/strong>(a)\u00a0\u00a0\u00a0\u00a0Value of closing stock
\n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0N
\n100 units held at the beginning values at N2 each\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0200
\n\"\"\/\"\"\/\"\"\/\"\"\/100 units bought in January at N3 each\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0300
\n200 units of stock at end has a value of\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0500
\n\u00a0\u00a0\u00a0\u00a0(b)\u00a0\u00a0\u00a0\u00a0Cost of goods sold
\n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0N
\n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0100 units bought in Dec. at N5 each\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0500
\n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0300 units bought in June at N4 each\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 1,200
\n\"\"\/\"\"\/\"\"\/\"\"\/\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0100 units bought in Dec. at N3\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0300
\n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0500 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 2,000
\n(III)\u00a0\u00a0\u00a0\u00a0WEIGHTED AVERAGE COST METHOD.
\n<\/strong>This simply uses the weighted average method to value closing stock and cost of goods sold.
\nExample:
\n<\/strong>Same as in under FIFO
\nSUGGESTED SOLUTION
\n<\/strong>Months\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Units\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Unit cost\u00a0\u00a0\u00a0\u00a0Total cost(N)
\nJanuary (Opening)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0100\u00a0\u00a0\u00a0\u00a0x\u00a0\u00a0\u00a0\u00a02\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 200
\nJanuary (Purchases)\u00a0\u00a0\u00a0\u00a0200\u00a0\u00a0\u00a0\u00a0x\u00a0\u00a0\u00a0\u00a03\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 600
\nJune (Purchases)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0300\u00a0\u00a0\u00a0\u00a0x\u00a0\u00a0\u00a0\u00a04\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a01,200
\n\"\"\/\"\"\/\"\"\/\"\"\/June (Purchases)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0100\u00a0\u00a0\u00a0\u00a0x\u00a0\u00a0\u00a0\u00a05\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 500
\nDecember (Purchases)\u00a0\u00a0\u00a0\u00a0700\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a02,500
\nWeighted Average cost: N2,500\u00f7700=N3.57
\n(a)\u00a0\u00a0\u00a0\u00a0Value of closing stock
\n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0N
\nNo of units of closing stock\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0200
\nWeighted average cost per unit\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a03.57
\nValue of closing stock\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a03.57×200
\n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 =\u00a0\u00a0\u00a0\u00a0714
\n(b)\u00a0\u00a0\u00a0\u00a0Cost of Goods sold
\n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0N
\nNumber of units sold\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0500
\nWeighted average cost per unit sold\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a03.57
\nCost of all units sold\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a03.57×500
\n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 =\u00a0\u00a0\u00a0\u00a01,785<\/p>\n

\u00a0
\n\u00a0
\n\u00a0
\n\u00a0
\n\u00a0
\n\u00a0ASSIGNMENT
\n<\/strong>1.\u00a0\u00a0\u00a0\u00a0Explain why the valuation of stock is necessary in a business.
\n2.\u00a0\u00a0\u00a0\u00a0Outline and discuss the common problems associated with stock valuation.
\n3.\u00a0\u00a0\u00a0\u00a0Using the following date, calculate and show
\n\u00a0\u00a0\u00a0\u00a0(a)\u00a0\u00a0\u00a0\u00a0The value of closing stock
\n\u00a0\u00a0\u00a0\u00a0(b)\u00a0\u00a0\u00a0\u00a0The cost of goods sold under
\n\u00a0\u00a0\u00a0\u00a0(i) FIFO\u00a0\u00a0\u00a0\u00a0(ii) LIFO and \u00a0\u00a0\u00a0\u00a0(iii) Weighted average cost method of stock valuation.
\n\u00a0\u00a0\u00a0\u00a0Opening stock: 10 units valued at N20 each.
\nPurchases
\nJanuary 20 units at N40 each
\nMarch 20 units at N34 each
\nSept 40 units at N40 each.<\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0Sales
\n\u00a0\u00a0\u00a0\u00a0April 16 units for N46 each
\nDecember 48 units for N56 each<\/p>\n","protected":false},"excerpt":{"rendered":"

WEEK EIGHT (8) TO TEN (10) STOCK VALUATION Methods of stocks valuation are devices which…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,234],"tags":[],"class_list":["post-2907","post","type-post","status-publish","format-standard","hentry","category-posts","category-first-term-ss2-book-keeping"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts\/2907","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/comments?post=2907"}],"version-history":[{"count":1,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts\/2907\/revisions"}],"predecessor-version":[{"id":2908,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts\/2907\/revisions\/2908"}],"wp:attachment":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/media?parent=2907"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/categories?post=2907"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/tags?post=2907"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}