FOR

INVENTORY

Presented by
Sh Turab Haider
Inventory/ Stock
Inventory is finished goods a
company accumulates before
selling. It can also describe the
raw materials used to produce
the finished goods.
 Summary of different accounts

Purchase account

Purchase account is in which inventory is

recorded when stock is purchased on cash so
we will
Dr the purchase account and
Cr the cash account.
 Sale account for cash
 Once the sales are made to customer it is known
as sales account. Sales account contain the
record of all sales transaction that may be cash
or credit sales so if the sale of inventory is on
cash then
 Cr the sale account and
 Dr the cash account
 Sale account on credit

If the sale is on credit we will

Dr the creditor account (debt
is increased)
Cr the sales account
 Return Inwards
Return inward means when the
stock is returned by the customer
 Dr the return inward account and
 Cr the debtor account( debtor is
reduced)
 Return outwards
Return outward mean the purchase
goods are return back to supplier. So we
will
Cr the return outward account and
Dr the creditor account (because
liability is decreased)
Rules for Dr and Cr for different accounts

 Purchase account
When we purchase the goods on cash the purchase account is debited because
or expense is increased and cash is credited because there is decrease in cash.
 Sales account on cash
When we sales the goods our income is increased so whenever income is
increased it is credited and cash will be increased, as cash is assset so it is
debited.
 Sales account on credit
When we sale the goods on credit sale account will be credited as income is
increased and liability of creditor is increased so creditor account will be debited
 Return inward
Return inwards is the return of sold goods by the customer so asset
is increased thats why we will debit the return inward account and
debt is reduced so debtor account will be credited.
 Return outward
Return outward is the return of goods back to supplier so the assets
decreased thats why return outward account will be credited and
liability decreased so creditor account will be debited
Purchase of inventory for cash
Example

 On 2 August 2012 good costing $310 are bought cash being paid for them
immediately at the time of purchase.

Purchase account
Date debit $
2 August 2012 Purchase account 310

Cash account
Date credit $
2 Augest 2012 Cash account 310
Sales of inventory on credit example

 On 3 August 2012 goods were sold on credit $375 to J.Lee

Date Debit $
3 Augst 2012 J.Lee account 375

Date Credit $

3 Augst 2012 Sale account 375

Sales of inventory for cash
Example
 On 4 August 2012 goods are sold for $55 cash being recieved immediately at
the time of sale.

Date debit $
4 August 2012 Cash account 55

Date credit $
4 August 2012 Sale account 55
Return inwards example
 On 5 August 2012 goods which had been previously sold to John for $29 are
now returned

Date Debit $
5 August 2012 Return inward 29

Date Credit $

5 August 2012 Debtor John 29

Return outwards Example

 On 6 August 2012 goods previuosly bought for $96 are returned by the
business to K.Howe

Date Debit $

6 August 2012 K.Howe account 96

Date Credit $
6 August 2012 Return Outwards 96