January 2023

Inventory valuation: Introduction

By |2022-09-15T12:32:27+02:00January 24th, 2023|Cambridge AS A Level Accounting, Notes, ZIMSEC A Level Accounting|

Cambrige AS and A Level Accounting Notes (9706)/ ZIMSEC  Advanced Accounting Level Notes: Inventory valuation: Introduction

  • It has already been pointed out elsewhere that there are several types of entities:
    1. Manufacturing entities that make goods and sell them
    2. Merchandising entities that purchase goods and sell them for a profit for example supermarkets
    3. Entities that provide services for […]
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Absorption Costing: Introduction

By |2022-09-15T12:30:47+02:00January 24th, 2023|Cambridge AS A Level Accounting, Notes, ZIMSEC A Level Accounting|

Cambrige AS and A Level Accounting Notes (9706)/ ZIMSEC  Advanced Accounting Level Notes: Absorption Costing: Introduction

  • As already said in the introduction to costing for overheads
  • Businesses need to know the cost of production for each unit of production
  • There are many reasons why a business would need to know this:
    1. To calculate a selling price that […]
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Marginal Costing: Statement of Profit or Loss

By |2022-09-15T12:30:34+02:00January 24th, 2023|Cambridge AS A Level Accounting, Notes, ZIMSEC A Level Accounting|

Cambrige AS and A Level Accounting Notes (9706)/ ZIMSEC  Advanced Accounting Level Notes: Marginal Costing: Statement of Profit or Loss

  • As has been outlined here there are differences between marginal costing and absorption costing
  • One such stark difference is in the format of statements of profit
  • Below is a proforma Statement of Profit using marginal costing

Marginal Costing Statement […]

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International Accounting Standard 2 (IAS 2): Inventories

By |2022-09-15T12:32:26+02:00January 24th, 2023|Cambridge AS A Level Accounting, Notes, ZIMSEC A Level Accounting|

Cambrige AS and A Level Accounting Notes (9706)/ ZIMSEC  Advanced Accounting Level Notes: International Accounting Standard 2 (IAS 2): Inventories

  • This International Financial Reporting Standard deals with inventories specifically:
    1. It defines what assets are to be considered inventories
    2. It dictates how these inventories are to be valued
    3. Prescribes how these inventories ought to be treated in accounting terms […]
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Overhead apportionment, allocation and allotment

By |2022-09-15T12:30:45+02:00January 24th, 2023|Cambridge AS A Level Accounting, Notes, ZIMSEC A Level Accounting|

Cambrige AS and A Level Accounting Notes (9706)/ ZIMSEC  Advanced Accounting Level Notes: Overhead apportionment, allocation and allotment

  • As already pointed out here at the first step of absorption costing  involves the processes of:
    1. Allocation
    2. Allotment and
    3. Apportionment
  • In very simple cases where there is only product none of this is necessary as overheads can be easily […]
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Marginal Costing: Statement of Profit Worked Example

By |2022-09-15T12:30:34+02:00January 24th, 2023|Cambridge AS A Level Accounting, Notes, ZIMSEC A Level Accounting|

Cambrige AS and A Level Accounting Notes (9706)/ ZIMSEC  Advanced Accounting Level Notes: Marginal Costing: Statement of Profit Example

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Period-end vs continuous inventory records

By |2022-09-15T12:32:26+02:00January 24th, 2023|Cambridge AS A Level Accounting, Notes, ZIMSEC A Level Accounting|

Cambrige AS and A Level Accounting Notes (9706)/ ZIMSEC  Advanced Accounting Level Notes: Inventory valuation: Period-end vs continuous inventory records

  • As pointed out in our examination of the International Accounting Standard (IAS 2)
  • There are two accepted methods of keeping inventory records:
    1. The traditional period-end / periodic and
    2. Continuous inventory records
  • These methods are in turn used […]
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Overhead absorption and absorption rates (OAR)

By |2022-09-15T12:30:46+02:00January 24th, 2023|Cambridge AS A Level Accounting, Notes, ZIMSEC A Level Accounting|

Cambrige AS and A Level Accounting Notes (9706)/ ZIMSEC  Advanced Accounting Level Notes: Absorption Costing:  Overhead Absorption Rates (OAR)

  • As already pointed out elsewhere production overheads are usually calculated at the beginning of the accounting period
  • This would allow, for example, the business to determine how much cost to assign to a unit before calculating the selling price

    • […]

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Reconciliation of absorption and marginal profits

By |2022-09-15T12:30:33+02:00January 24th, 2023|Cambridge AS A Level Accounting, Notes, ZIMSEC A Level Accounting|

Cambrige AS and A Level Accounting Notes (9706)/ ZIMSEC  Advanced Accounting Level Notes: Reconciliation of marginal costing and absorption costing profits

  • Because absorption costing includes the cost of fixed overheads in:
    1. Opening and closing inventory and
    2. Cost of sales
  • There will be inevitable differences in profit figures calculated using the two methods
  • These differences will arise whenever there […]
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Inventory valuation methods

By |2022-09-15T12:32:25+02:00January 24th, 2023|Cambridge AS A Level Accounting, Notes, ZIMSEC A Level Accounting|

Cambrige AS and A Level Accounting Notes (9706)/ ZIMSEC  Advanced Accounting Level Notes: Inventory valuation: Inventory valuation methods

  • The figure for inventory is obtained from actual physical stock takes
  • We have already looked at the exact definition of inventories during the introduction to inventories and when we looked at IAS 2
  • It has also been pointed out […]
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