how to calculate closing stock in consignment account
Answers
Answer:
The most obvious way to calculate closing inventory is by doing a physical count at the end of each month and then to value the inventory using a valuation method such as LIFO, FIFO and Weighted Average Method.
However, in most cases, it’s not practical to carry out a physical count. Hence an estimation method is used for estimating closing inventory.
1. Gross Profit Method
2. Retail Method
Use the following steps to calculate closing inventory by the gross profit method:
- Add the cost of beginning inventory to the cost of purchases during the period. This is the cost of goods available for sale.
- Multiply the gross profit percentage by sales to find the estimated cost of goods sold.
- Subtract the cost of goods available for sold from the cost of goods sold to get the ending inventory.
The retail inventory method is commonly used by retailers to calculate their ending inventory. This method uses the proportion of the retail price to cost in prior periods. The calculation is:
Compute the cost-to-retail percentage.
|The formula for this is:
- Cost-To-Retail Percentage = Cost / Retail price
- Calculate the cost of goods available for sale.
The formula is:
- Cost of Good Available for Sale = Cost of beginning inventory + Cost of purchases
- Calculate the cost of sales during the period
The formula is:
- Cost of Sales = Sales x Cost-To-Retail Percentage
- To calculate the ending inventory, use the following formula
- Ending Inventory = Cost of goods available for sale – Cost of sales during the period
- This method only works if you consistently all products are marked up by the same percentage. This means that if there are a series of discounts for stock clearance after the main selling season, it can change the outcome of this calculation.
Partially completed inventory is known as work in process is inventory. This inventory requires additional processing before it can be classified as finished goods inventory.
The calculation of ending work in process is:
Beginning WIP + Manufacturing Costs – Cost of Goods Manufactured
= Ending Work in Process
It is important to note that the methods of calculating ending inventory can only be used for estimating the inventory. A physical count or a cycle counting program is needed for an accurate ending inventory valuation
Answer:
usє thє fσllσwíng stєps tσ cαlculαtє clσsíng ínvєntσrч вч thє grσss prσfít mєthσd: αdd thє cσst σf вєgínníng ínvєntσrч tσ thє cσst σf purchαsєs duríng thє pєríσd. thís ís thє cσst σf gσσds αvαílαвlє fσr sαlє. multíplч thє grσss prσfít pєrcєntαgє вч sαlєs tσ fínd thє єstímαtєd cσst σf gσσds sσld.