What are the approaches to accounting for inventory

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Your friend works for a bookshop that uses an electronic scanning device at the checkout. Your friend has said that at any time they can look up the number of books in stock and how many have been sold so far during the accounting period. When the bookshop does a stocktake they compare the actual number of books for each title to the number that the computer says they should have.

You work at the market in a fruit and vegetable stall and the owner has told you that they just keep track of what they have paid to purchase fruit during the year and at the end of the year they do a stocktake so that the accountant can prepare the financial reports.

1. What are the two approaches to accounting for inventory that were covered in the course?

2. Which inventory method is the bookshop using and which method is the fruit and vegetable stall using?

3. When inventory is describe how it is treated under e- of the inventory methods and en explain how it is treated when it i sold.

4. Why is a stocktake done under each of the methods of accounting for inventory?

5. Explain why the inventory method used for the bookshop and the one used for the fruit and vegetable stall are the most appropriate for each.

Reference no: EM13325606

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