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FIFO and LIFO(Solved Problems) - Material Cost, Cost Accounting Video Lecture | Cost Accounting - B Com
FAQs on FIFO and LIFO(Solved Problems) - Material Cost, Cost Accounting Video Lecture - Cost Accounting - B Com
| 1. What is FIFO and LIFO in cost accounting? |  |
Ans. FIFO (First-In, First-Out) and LIFO (Last-In, First-Out) are two inventory valuation methods used in cost accounting. FIFO assumes that the oldest inventory is sold first, while LIFO assumes that the newest inventory is sold first.
| 2. How does FIFO affect material cost calculations? | |
Ans. FIFO affects material cost calculations by valuing the inventory based on the cost of the oldest units purchased. This means that the cost of materials used in production will reflect the cost of the earliest purchases, leading to a more accurate representation of the current market value of inventory.
| 3. How does LIFO affect material cost calculations? | |
Ans. LIFO affects material cost calculations by valuing the inventory based on the cost of the most recent units purchased. This means that the cost of materials used in production will reflect the cost of the latest purchases, which may not accurately represent the current market value of inventory during inflationary periods.
| 4. Which inventory valuation method is more commonly used, FIFO or LIFO? | |
Ans. The choice between FIFO and LIFO usually depends on various factors, such as the company's industry, tax regulations, and specific business needs. However, FIFO is more commonly used as it provides a better matching of current costs with current revenues, and it usually results in higher profitability during inflationary periods.
| 5. How do FIFO and LIFO impact the financial statements of a company? | |
Ans. FIFO and LIFO can impact the financial statements of a company differently. Under FIFO, the cost of goods sold is lower, leading to higher gross profit and higher net income. On the other hand, under LIFO, the cost of goods sold is higher, resulting in lower gross profit and lower net income. Additionally, the value of inventory on the balance sheet will also differ between the two methods.
Text Transcript from Video
this video I am going to explain FIFO
and LIFO method in pricing of material
issue so what is the meaning of pricing
of material issue say in cost account
ascertainment of accurate or exact cost
is on of the main objective of cost
accounting in cost accounting will have
different topics like materials
overheads wiper cost these are the
different topics in cost accounting but
in costs are putting the main objective
is to ascertain to find out the exact
total cost of production is the main
objective so in order to ascertain the
accurate cost which depends upon the
correct valuation of material used in
the production department so generally
in an organization will have different
departments for example purchase
department stores department production
department finance department HR
department these are the different
operational areas in the organization in
the organization in purchase department
their main function is to acquire the
raw material from the different supplier
before they purchase the product they
will collect the information from
various supplier they'll collect the
quotation after receiving all the
information will decide which one is
best they'll analyze the quotation based
on some criteria and finally they'll
make a decision to purchase the
particular material from the particular
supplier so generally in purchase price
of material fluctuate on account of
different reason
the first one is change in the product
riser
they won't buy the entire raw material
from one particular supplier on one time
then purchase quantity a smaller
quantity or huge quantity or some
limited quantity or a great quantity
from different supplier in a time
intervals so purchase price of a
material fluctuate on account of three
reason first one is change in the
product price second one buying from
different supplier so each and every
supplier they put different prices so
that is also one of the reason for price
fluctuation and third one is some supply
they'll allow some quantity discount
trade discount or cash discount so that
is also not the reason for price
fluctuation but here we need to
ascertain the exact cost of material
issue to the production department it is
a duty of the storekeeper to record all
the informations about the unit or raw
material purchase from different
supplier whenever they receive any item
or any units or any number of units from
the supplier will make entry in a
chronological order and after the hata
they'll receive a material requisition
form from the production department
after receiving the material requisition
form from the production department only
the storekeeper will issue the material
to the required or production department
in such case they need to value or they
need to price of material issue whenever
the issue material they need to find the
exact price for the yo nature in such
case they need to follow any one method
of pricing of material in this video I
am going to expect only two method which
is very very important the first one is
FIFO method FIFO method means first in
first out method so it's very very
simple concept so whenever he received
any unit or from the supplier
he immediately storekeeper need to
record in his books of accounts that is
toast ledger in stores ledger whenever
you receive goods or issue goods to
production department he need to record
both the transaction so that every time
whenever he receive any item he need to
see the balance then whenever you issue
any any units to production department
he need to find out how much after
ensuring the unit how much unit balance
are there all these things should be
properly maintained by this doorkeeper
so let me explain the basic concept
about FIFO before means fi fo first in
first out so according to this method
when an issue is made to the production
department the price of the earliest lot
in the stock is charged to the receiving
department when the lot is exhausted the
next lot is used at the a respect
price of that particular Lord this
method resembles the Q system so
according to FIFO method as a
storekeeper we need to issue the Lord
from the earliest one so which one is
earliest first-in first-out
first we have received or purchased some
unit from the particular supplier now we
need to exhaust the first lot and after
exhausted after completing the entire
unit only then we need to go for second
Lord so it will be like queuing system
so according to this rule only the
storekeeper can able to issue and that's
okay Peck and able to price the material
issue this is called as pricing of
material according to FIFO method so let
us see the problem with the help of this
problem you will have a thorough
knowledge about FIFO method from the
particulars given below
write up the stores ledger card so they
ask you to prepare stores ledger
according to FIFO method so first one
2015 me first it opening stop thousand
two hundred units at the rate of 20 each
so Nastia closing stock will be the
opening stock for current there no this
is an opening stock and then on second
ma they are purchased or six hundred
unit at a rate of nineteen Droopys fifty
paisa then on 5th of May issued eight
hundred units er on twelve purchased
thousand three hundred units at a rate
of nineteen rupees H and on fifteen the
issued thousand 250 units on twentieth
purchased a thousand units at the rate
of twenty rupees H on twenty nine the
issued thousand seven hundred units on
30th purchased thousand units at the
rate of 22 rupees H on 31st issued 750
units so these are the transaction with
the help of this information you have to
prepare or dot fifty-four only for
method of issue and ascertain the value
of closing stock I have already
explained about the FIFO let us see the
answer according to this method after
that I will explain about Lefou method
now I am going to prepare stores ledger
account according to FIFO method first
in first out method this is a general
standard format of stores ledger account
name code number description
maximum level minimum level reorder
level reorder quantity folio number bin
number location code and then you have
to record the date of each and every
transaction date column in particular
column when the storekeeper receive any
material from the supplier he need to
write the reference number that is goods
received note number when he issue any
item or any material to production
department he need to write the
reference that is material requisition
number these are the two important term
it is required to record the
transactions related to material
purchased and material issued so date
column particular column is over then we
need to have three separate columns
first column to record the receptor when
he purchase any item in he receive any
material from the supplier he need to
record now how many number of quantity
receive and each quantity price and
amount for example 100 units and each in
price to rupees then 100 into to 200
rupees in the same way whenever you
issue any material to production
department he need to record how many
number of unit issued and each unit
price is a very important you need to
decide on what basis you are going to
fix the price for the production
department so according to FIFO only for
so based on that you have to desired the
rate per unit that and amount and
finally you will have
balancing figure so after issuing some
material to production department you
need to see how many number of units in
hand that is you need to find out the
balance in figure after finishing each
and every entry you need to find out the
balance then only can go for next step
so first one 2015 may 1st step opening
stock thousand two hundred units at
twenty rupees each say enter this item
under
clock golem have you have to show this
amount in balance column because these
are opening stock no last day closing
stock is up opening stock for the
current year 2015 may faster opening
stock no different balance brought down
balance brought down how many number of
eunuchs thousand two hundred unit each
unit price twenty rupees no just
multiply thousand two hundred into 20s
twenty four thousand second one on
second May 2015
purchased six hundred units each unit
cost nineteen Droopys 50 pies this
entered is item in received economy
because he purchases in certain units I
told you know you have to mention you
have to write the reference when you
receive any purchase when you receive
any raw material from the supplier you
need to write goods received note number
that is G or n number goods received
note number you have to write the
reference number for the purchase
transaction so when you purchase item
that will be entered in the receptor
column how many number of units six
hundred units no six hundred units each
unit cost 19 rupees 50 pies just
multiply six hundred into nineteen point
five
11700 already you had thousand two
hundred opening balance now six hundred
units added no just you have to balance
this so already thousand two hundred
twenty rupees each 24,000 balance in
figure now we have made additional
purchase nineteen trippy 50 pies 11700
just draw a line next on 5th of may he
should eight hundred units already we
had opening balance of thousand to you
and we have made a purchase for six
hundred units total thousand eight and
units are there now we need to issue 18
units to production department so we
need to find from which lot we are going
to issue so according to FIFO method
first we need to issue the earliest one
we have to exhaust the first one after
exhausting the entire thing then we can
take the next Jebb lot that is according
to queue system you have to issue so now
we have to lot snow bunnies opening
stock and next purchase six hundred so
total thousand eight and it no be after
dessert on which lot we are going to
issue so appoint a fee for method we
have to concentrate first one first in
we need to exhaust the first one after
exhaustion the entire thing only we can
able to see that next one so now we have
thousand twenty sufficient you mean so
they no just take a janitor piece from
opening store and consider the twenty
rupees why shoe price and show the
amount in issue column on fifth of me
800 units you should know you have to
write the reference for purchase you
have to write goods received note number
when we issue any item to production
department we have to write material
requisition number material requisition
number okay is a reference for the
particular transaction how many number
of units is required by the production
department eight hundred units no just
look at the balancing figure opening
balance thousand two hundred units are
there and next purchased on second six
hundreds are there so if according to
fee for method we have to take only from
the earliest one earliest one is
thousand two hundred know from thousand
two hundred we can issue eight hundred
units are eight hundred units at which
price two prices are they no first one
is twenty by twenty rupees
again no 19 to peace 50 pies so we
according to FIFO method we have to take
the first one
earliest one so twenty rupees is they no
thousand out of thousand two hundred
each price twenty rupees we are going to
issue eight hundred units at the rate of
twenty rupees each twenty rupees just
multiply sixteen thousand
so after finishing the transaction you
need to find out the balancing finger
out of thousand two hundred you have
issued eight hundred what is a balance
four hundred balance is there each price
20 then 600 horses they didn't issue the
600 600 into 15 1950 just multiply this
value enter in amount column
8600 into nineteen eleven thousand seven
thousand seven hundred next transaction
on 12th May 2015
purchase one thousand three hundred
units at a rate of nineteen rupees each
Center this item under received column
so when you enter purchase transaction
you have to write goods received note
number on twelfth your purchase know so
goes Traci note number you have to write
the reference for the purchase how many
number of unit purchase thousand three
hundred units no this enter is shipped a
column thousand three hundred units each
unit price nineteen two piece age just
multiply that thousand three hundred
into nineteen to page twenty four
thousand seven hundred immediately you
have to record the balance also so
already we had 400 into 20 rupees each
eight thousand and second one six
hundred also is the nineteen rupees
fifty 11700 now we have made additional
purchase 1300 ad along with the previous
balance thousand three hundred nineteen
rupees what is the value twenty four
thousand seven hundred in the same way
for each and every transaction after
entering the received or issue
immediately we need to see the total
balance next one 115 to me issued
thousand to fifty units in order to
record the issue transaction you have to
record material requisition number
as reference on 15 yeah we should know
so you have to write material
requisition number to show which
department asked so the informations
regarding the requisition of material
how many number of units is you thousand
250 so before you enter a thousand 250
units here you need to find out from
which not you are going to issue because
we have four hundred a separate law six
hundred at 1915 and thousand three
hundred nineteen so according to FIFO
method we have to exhaust the first one
we need to issue from the first balance
this is called us before method first-in
first-out we have four hundred then
second option goes to six hundred third
option will go to thousand three hundred
lot so first we need to exhaust the
first one four hundred is a now just
take the five four hundred units and it
should this item I got this in issue
column four hundred each unit price
twenty rupees No
eight thousand how many number of units
requite thousand 250 we have issued only
400 remaining is there no next just look
at the next alone we have 600 no so
again you can take the six this one 600
at the rate of 19 through pays 50 pies
11700 so how many number units required
by the production department thousand
250 so far we have taken thousand four
hundred from the first one 600 from the
second one total thousand is over
remaining 250 is there no so that 250
can take from the third one 215 each
price 1930s know this multiply to 15 to
19 4000 750 now find out the balance you
have issued 400 600 also to fully
exhausted from thousand three hundred
euro issue 215 now we have balance only
thousand fifty units each price 19 what
is amount nineteen thousand nine fifty
next one on 20th purchased thousand
units
at 20 each so you have to record this
information what is the friends number
goods resale note number on 28th your
purchase no so you have to write the
reference goods received note number as
reference number so how many number of
units purchased thousand no enter is zip
to column thousand units each unit price
20 rupees this multiplied with this
20,000 now you have to show that
balancing finca so already we had
thousand fifty each 19 rupees 19
thousand nine fifty now we have purchase
thousand units now at the rate of 20
rupees 20,000 next on 29th main issue
thousand seven hundred units now we have
to issue thousand seven hundred units
from the balance and twenty nine we are
going to issue thousand seven and units
to production department now you have to
write the reference number material
requisition number you have received no
you have received material requisition
note from the production department you
have to write that reference for the
transaction so how many number of units
you required by the production
department thousand seven hundred units
and see the first one so according to
FIFO method first you have to issue the
first one thousand fifty take this
balance and issue thousand fifty each
price 19 rupees 19 thousand nine fifty
still we need to issue 650 so that you
can take from the second lot and
thousand units are they know from
thousand units you can take six fifty
you have to charge this price because
you have taken from this lot no you have
to charge this price twenty rupees six
fifty into twenty thirteen thousand okay
so what is a balance thousand fifty
fully exhausted fully issued to
production department from thousand unit
you have taken six fifty eight so
remaining three fifty units are they
he joined Christ 20 Rapace know just
multiply and find the amount 7000 into
transaction 30th of May 2015 purchased a
thousand units at 22 rupees each enter
this transaction under received a column
on third tier purchase 2,000 unit known
say after write goods receipt note
number how many number of in purchase
thousand units each unit price 22 rupees
so 22,000 just enter the balance column
just fill the balance column already 350
is there 20 rupees each 7000 amounts and
now we have purchased thousand unit know
each price 22 for 22,000 rupees then
last one on 31st May issued 750 units to
production department 31st you should
know you have to write material
requisition number so how many number of
units 750 you need so according to
before method you have to take from that
first one earliest one 350 is there now
first issue this one 350 20 rupees each
7000 is over so 750 is rate what 350 is
given still we need 400 unit know so
that we can take from the next to load
thousand thousand units are they know
from thousand you can take 400 units 22
rupees
what is amount 8800 so what is the
balance 350 is given 1000 we have issued
400 units remaining we have only 600
units at the rate of 20 to repay so you
need to find out the amount
13200 after entering all these
transaction storekeeper need to write
the closing stop how many number of
units are there in balancing column 600
units each unit price 22 repeats among
13 thousand two hundred
that you need to write here closing
stock 600 units at 22 rupees each amount
rupees 13200 let me explain once again
first you need to show the balancing
figure opening balance thousand two
hundred into twenty rupees and then on
second purchase made six minutes
purchase know that unity record under
reciprocal and six hundred purchased at
a rate of 19 two piece of tea 11700 so
you need to rebalance each and after
finishing each and every transaction you
need to show the balance in figure so
already thousand two hundred 220 now you
have purchased six hundred no total
thousand eight hundred is day and out of
that on fifth they are issued 800 units
to production department so you have to
write like this material requisition
note number hey Janet units no you have
to take from the first one so first one
we have thousand two hundred from
thousand two hundred is issued what is
the balancing figure from thousand two
hundred units you have issued H and at
balancing figure four hundred and second
law 600 is their total thousand lot is
there as balancing figure next on 12 the
purchase made four thousand three
hundred again you have to balance the
item first one four hundred balancing
figure is there and 600 now we have
purchased thousand three hundred so
total 2300 is their out of that on
fifteen thousand 250 units required by
the production department
you cannot take from the thousand three
hundred you have to go according to the
order fee for method now first you need
to take from the first one
four hundred is there you can take the
four hundred and you can issue the six
hundred also total thousand is over
still we need 250 that 250 can take from
the last one balancing figure thousand
fifty at the rate of 19 rupees nineteen
thousand nine fifty on 28 the goods
purchase for how many units thousand
units but you have the rate of twenty
rupees age twenty thousand
you have to balance that she already
thousand fifty is there additional
purchase made thousand total 2050s day
and then on twenty nine ten thousand
seven hundred units required by the
production department and so first unity
take first to long term the first
allotted thousand fifty reminding 650 is
record not that you can issue from the
balancing figures thousand is they
enough one thousand you can take 650
balance thousand - 650 350 then on 30th
you have purchased thousand unity so
already we have 350 and again purchase
made no thousand add total thousand
three fifty units are there from that on
thirty is the step me again 750 units
required by the production department
so from thousand three fifty have to
take the first one 350 balance four
hundred units required no you can take
from a thousand so balance thousand -
400 600 units so closing stock as on
31st May and 600 units at the rate of 22
rupees tota 13200 according to FIFO
method you have to find out closing
stock now I'm going to explain live for
method before means and last in first
out method so I am going to explain
before method with the help of same
problem saying according to Lee for
method the price of material last
purchase and kept in stores is charged
for the issue first and then the
proceeding Lord's purchase are issued
this is a pro simple procedure for Lee
for method according to FIFA we have to
take the first method earliest purchase
will be issued and then we have to press
in a Quantic Ewing system but according
to Lee for method we have to issue the
issue material from the last purchaser
so that is a difference between
FIFO and LIFO let us see the problem
first one opening stop thousand two
hundred units at twenty rupees each 2015
may first balance brought down
how many number of mins add a thousand
two hundred no this enter under balance
column thousand two hundred quantity or
yo Nate
each unit twenty repays know what is the
amount twenty four thousand on second
purchase six hundred units at 99 rupees
fifty paisa each on second may purchase
so the purchase transaction you have the
record goods received notes number Holly
numbers purchase six hundred unit note
that you have to write and up receive
the column six hundred you names at
nineteen through peace 50 pies H 11,700
just write the balance already thousand
two hundred units are there as opening
balance twenty rupees age twenty four
thousand now have purchased six hundred
units at nineteen replace 50 pies age
eleven thousand seven hundred then on
fifth the issued eight hundred units no
for issue you have to write material
requisition number fifth issue to
production department know some material
requisition number how many you is
requirement production department a
tender according to Lee for method you
have to issue from the last lot already
we have thousand two hundred as opening
balance and your perch is six hundred
know from these two lot you have to take
the lock front e last one so last the
six hundred is they know from that you
have to issue so eight hundred unit is
required now enter six hundred you can
issue 19 through piece 50 pies 11700
south of eight hundred six hundred issue
remaining two hundred is they know that
two hundred you can take from the next
one next option after exhausting the
anti I think the next option is thousand
two hundred is they know from thousand
two hundred a can issue two hundred
units total eight and it is over no four
thousand okay so now six hundred is
issued now we have thousand two hundred
200 you have reshoot 200 balance
thousand units are there at 20 rupees
age 20,000 on 12th purchased thousand
300 units at a rate of 19 rupees age
suppose you have to enter the
transaction and I received a column and
12 codes
please say note number how many number
of means purchase thousand three hundred
no just right under receptor : thousand
three hundred endow 19 rupees H
multiplied with this 24,700 just find
out the balancing figure already we had
thousand units at twenty rupees age
twenty thousand now we have made
additional purchase no thousand three
hundred units at 19 - please age twenty
four thousand seven hundred next on May
15th issue thousand 250 units safety
record this information and an issue
column on 15 you have the right material
requisition number for issue so how many
number of units record by the production
department thousand 250 so according to
Lee for method you have to issue from
the last one last in first out thousand
250 at the rate of nineteen rupees each
23 thousand seven fifty what is the
balance thousand is there hidden issue
thousand thousand twenty rupees age
twenty thousand is there from thousand
three hundred we have assured thousand
250 what is the balance fifty units each
unit nineteen rupees what is the amount
950 on 20th purchase two thousand units
at a rate of 20 repeats age say after
record in reciprocal and because your
purchase equate the raw material now so
on 20th the goods received
number how many units thousand units
Center is shipped a column thousand
units at the rate of 20 rupees 20,000
again you have to balance first a lot
thousand rupee thousand units into 20
each 20 thousand is there and fifty
units at the rate of 19 to piece each
950 is there and now we have purchased
thousand units now thousand twenty
rupees each total how many units are
there two thousand fifty units next you
know 29th of May issue thousand seven
hundred units on 29th the unit eh 2700
no fire show you have to write material
requisition number how many units is
required by the production department
thousand seven hundred no according to
Lee for method you have to take from the
last one so thousand lot is there no
thousand unit is there in the last Lord
just take from the last 1000 just issue
the entire thing because you need to
issue thousand seven hundred no thousand
into twenty rupees age twenty thousand
rupees twenty thousand rupees and still
we need to issue seven hundred you have
to go for the next one next option is
fifty you have to issue the entire 59
fifty so how many number of units record
by the production department thousands
on fifty week so far we have issue
thousand fifty no still winning six
fifty that we can take from the last one
from thousand six fifty you have to take
twenty rupees thirteen thousand you have
to write the balance there thousand lot
is issued fifty also issued now we have
only thousand from thousand you have
issued six fifty so balancing figure is
350 units at twenty rupees each seven
thousand rupees next on 30th May
purchased a thousand units at twenty two
rupees H so you have to enter this
transaction under
recipt a column
on 30th the goods received note number
how many number of units purchased
thousand units at the rate of 22 rupees
age 22 thousand balance last balance 350
into 20 rupees age seven thousand now we
have purchased thousand additional
purchased 22 rupees age 22 thousand in
the last one on 31st May issued 750
units say after record is information
under issue column 30 first steps you
have to write material requisition
number for issue so how many number of
units required by the production
department 750 units no according to
leave for method you have to take from
the last lot that is a reason to the
last one is thousand unit know from
thousand you have to issue 750 750 at
the rate of last one 22 rupees each
16500 balance 350 is there within tissue
350 units 20 rupees each seven thousand
and from thousand you have your shirts
on 50 according to leave for method what
is a balance in figure thousand - 150
250 into 22 rupees five thousand five
hundred
now you need to write the closing stock
closing stop is equal to harmony means
350 units add to 15 inch total 600 units
it gained value - just take the total
seven thousand plus five thousand five
hundred 350 into 20 plus 250 into twenty
two what is the total 12,500 there's a
value six hundred units in value 12,500
so according to Lee for method this is a
closing stock now we can compare with
the FIFO method see according to FIFA
method closing stock is six hundred
units are 22 rupees each value
13200 according to Lee for method
closing stock is six honored union but
valued at 12,500 that is a difference
between before and leave for fee for
means first in first out you have to
issue from the first lot earlier Lord
according to Lee for you have to issue
from the last lot Scott Lee for method
last in first out hope you could
understand the FIFO only for method from
this video thank you
and LIFO method in pricing of material
issue so what is the meaning of pricing
of material issue say in cost account
ascertainment of accurate or exact cost
is on of the main objective of cost
accounting in cost accounting will have
different topics like materials
overheads wiper cost these are the
different topics in cost accounting but
in costs are putting the main objective
is to ascertain to find out the exact
total cost of production is the main
objective so in order to ascertain the
accurate cost which depends upon the
correct valuation of material used in
the production department so generally
in an organization will have different
departments for example purchase
department stores department production
department finance department HR
department these are the different
operational areas in the organization in
the organization in purchase department
their main function is to acquire the
raw material from the different supplier
before they purchase the product they
will collect the information from
various supplier they'll collect the
quotation after receiving all the
information will decide which one is
best they'll analyze the quotation based
on some criteria and finally they'll
make a decision to purchase the
particular material from the particular
supplier so generally in purchase price
of material fluctuate on account of
different reason
the first one is change in the product
riser
they won't buy the entire raw material
from one particular supplier on one time
then purchase quantity a smaller
quantity or huge quantity or some
limited quantity or a great quantity
from different supplier in a time
intervals so purchase price of a
material fluctuate on account of three
reason first one is change in the
product price second one buying from
different supplier so each and every
supplier they put different prices so
that is also one of the reason for price
fluctuation and third one is some supply
they'll allow some quantity discount
trade discount or cash discount so that
is also not the reason for price
fluctuation but here we need to
ascertain the exact cost of material
issue to the production department it is
a duty of the storekeeper to record all
the informations about the unit or raw
material purchase from different
supplier whenever they receive any item
or any units or any number of units from
the supplier will make entry in a
chronological order and after the hata
they'll receive a material requisition
form from the production department
after receiving the material requisition
form from the production department only
the storekeeper will issue the material
to the required or production department
in such case they need to value or they
need to price of material issue whenever
the issue material they need to find the
exact price for the yo nature in such
case they need to follow any one method
of pricing of material in this video I
am going to expect only two method which
is very very important the first one is
FIFO method FIFO method means first in
first out method so it's very very
simple concept so whenever he received
any unit or from the supplier
he immediately storekeeper need to
record in his books of accounts that is
toast ledger in stores ledger whenever
you receive goods or issue goods to
production department he need to record
both the transaction so that every time
whenever he receive any item he need to
see the balance then whenever you issue
any any units to production department
he need to find out how much after
ensuring the unit how much unit balance
are there all these things should be
properly maintained by this doorkeeper
so let me explain the basic concept
about FIFO before means fi fo first in
first out so according to this method
when an issue is made to the production
department the price of the earliest lot
in the stock is charged to the receiving
department when the lot is exhausted the
next lot is used at the a respect
price of that particular Lord this
method resembles the Q system so
according to FIFO method as a
storekeeper we need to issue the Lord
from the earliest one so which one is
earliest first-in first-out
first we have received or purchased some
unit from the particular supplier now we
need to exhaust the first lot and after
exhausted after completing the entire
unit only then we need to go for second
Lord so it will be like queuing system
so according to this rule only the
storekeeper can able to issue and that's
okay Peck and able to price the material
issue this is called as pricing of
material according to FIFO method so let
us see the problem with the help of this
problem you will have a thorough
knowledge about FIFO method from the
particulars given below
write up the stores ledger card so they
ask you to prepare stores ledger
according to FIFO method so first one
2015 me first it opening stop thousand
two hundred units at the rate of 20 each
so Nastia closing stock will be the
opening stock for current there no this
is an opening stock and then on second
ma they are purchased or six hundred
unit at a rate of nineteen Droopys fifty
paisa then on 5th of May issued eight
hundred units er on twelve purchased
thousand three hundred units at a rate
of nineteen rupees H and on fifteen the
issued thousand 250 units on twentieth
purchased a thousand units at the rate
of twenty rupees H on twenty nine the
issued thousand seven hundred units on
30th purchased thousand units at the
rate of 22 rupees H on 31st issued 750
units so these are the transaction with
the help of this information you have to
prepare or dot fifty-four only for
method of issue and ascertain the value
of closing stock I have already
explained about the FIFO let us see the
answer according to this method after
that I will explain about Lefou method
now I am going to prepare stores ledger
account according to FIFO method first
in first out method this is a general
standard format of stores ledger account
name code number description
maximum level minimum level reorder
level reorder quantity folio number bin
number location code and then you have
to record the date of each and every
transaction date column in particular
column when the storekeeper receive any
material from the supplier he need to
write the reference number that is goods
received note number when he issue any
item or any material to production
department he need to write the
reference that is material requisition
number these are the two important term
it is required to record the
transactions related to material
purchased and material issued so date
column particular column is over then we
need to have three separate columns
first column to record the receptor when
he purchase any item in he receive any
material from the supplier he need to
record now how many number of quantity
receive and each quantity price and
amount for example 100 units and each in
price to rupees then 100 into to 200
rupees in the same way whenever you
issue any material to production
department he need to record how many
number of unit issued and each unit
price is a very important you need to
decide on what basis you are going to
fix the price for the production
department so according to FIFO only for
so based on that you have to desired the
rate per unit that and amount and
finally you will have
balancing figure so after issuing some
material to production department you
need to see how many number of units in
hand that is you need to find out the
balance in figure after finishing each
and every entry you need to find out the
balance then only can go for next step
so first one 2015 may 1st step opening
stock thousand two hundred units at
twenty rupees each say enter this item
under
clock golem have you have to show this
amount in balance column because these
are opening stock no last day closing
stock is up opening stock for the
current year 2015 may faster opening
stock no different balance brought down
balance brought down how many number of
eunuchs thousand two hundred unit each
unit price twenty rupees no just
multiply thousand two hundred into 20s
twenty four thousand second one on
second May 2015
purchased six hundred units each unit
cost nineteen Droopys 50 pies this
entered is item in received economy
because he purchases in certain units I
told you know you have to mention you
have to write the reference when you
receive any purchase when you receive
any raw material from the supplier you
need to write goods received note number
that is G or n number goods received
note number you have to write the
reference number for the purchase
transaction so when you purchase item
that will be entered in the receptor
column how many number of units six
hundred units no six hundred units each
unit cost 19 rupees 50 pies just
multiply six hundred into nineteen point
five
11700 already you had thousand two
hundred opening balance now six hundred
units added no just you have to balance
this so already thousand two hundred
twenty rupees each 24,000 balance in
figure now we have made additional
purchase nineteen trippy 50 pies 11700
just draw a line next on 5th of may he
should eight hundred units already we
had opening balance of thousand to you
and we have made a purchase for six
hundred units total thousand eight and
units are there now we need to issue 18
units to production department so we
need to find from which lot we are going
to issue so according to FIFO method
first we need to issue the earliest one
we have to exhaust the first one after
exhausting the entire thing then we can
take the next Jebb lot that is according
to queue system you have to issue so now
we have to lot snow bunnies opening
stock and next purchase six hundred so
total thousand eight and it no be after
dessert on which lot we are going to
issue so appoint a fee for method we
have to concentrate first one first in
we need to exhaust the first one after
exhaustion the entire thing only we can
able to see that next one so now we have
thousand twenty sufficient you mean so
they no just take a janitor piece from
opening store and consider the twenty
rupees why shoe price and show the
amount in issue column on fifth of me
800 units you should know you have to
write the reference for purchase you
have to write goods received note number
when we issue any item to production
department we have to write material
requisition number material requisition
number okay is a reference for the
particular transaction how many number
of units is required by the production
department eight hundred units no just
look at the balancing figure opening
balance thousand two hundred units are
there and next purchased on second six
hundreds are there so if according to
fee for method we have to take only from
the earliest one earliest one is
thousand two hundred know from thousand
two hundred we can issue eight hundred
units are eight hundred units at which
price two prices are they no first one
is twenty by twenty rupees
again no 19 to peace 50 pies so we
according to FIFO method we have to take
the first one
earliest one so twenty rupees is they no
thousand out of thousand two hundred
each price twenty rupees we are going to
issue eight hundred units at the rate of
twenty rupees each twenty rupees just
multiply sixteen thousand
so after finishing the transaction you
need to find out the balancing finger
out of thousand two hundred you have
issued eight hundred what is a balance
four hundred balance is there each price
20 then 600 horses they didn't issue the
600 600 into 15 1950 just multiply this
value enter in amount column
8600 into nineteen eleven thousand seven
thousand seven hundred next transaction
on 12th May 2015
purchase one thousand three hundred
units at a rate of nineteen rupees each
Center this item under received column
so when you enter purchase transaction
you have to write goods received note
number on twelfth your purchase know so
goes Traci note number you have to write
the reference for the purchase how many
number of unit purchase thousand three
hundred units no this enter is shipped a
column thousand three hundred units each
unit price nineteen two piece age just
multiply that thousand three hundred
into nineteen to page twenty four
thousand seven hundred immediately you
have to record the balance also so
already we had 400 into 20 rupees each
eight thousand and second one six
hundred also is the nineteen rupees
fifty 11700 now we have made additional
purchase 1300 ad along with the previous
balance thousand three hundred nineteen
rupees what is the value twenty four
thousand seven hundred in the same way
for each and every transaction after
entering the received or issue
immediately we need to see the total
balance next one 115 to me issued
thousand to fifty units in order to
record the issue transaction you have to
record material requisition number
as reference on 15 yeah we should know
so you have to write material
requisition number to show which
department asked so the informations
regarding the requisition of material
how many number of units is you thousand
250 so before you enter a thousand 250
units here you need to find out from
which not you are going to issue because
we have four hundred a separate law six
hundred at 1915 and thousand three
hundred nineteen so according to FIFO
method we have to exhaust the first one
we need to issue from the first balance
this is called us before method first-in
first-out we have four hundred then
second option goes to six hundred third
option will go to thousand three hundred
lot so first we need to exhaust the
first one four hundred is a now just
take the five four hundred units and it
should this item I got this in issue
column four hundred each unit price
twenty rupees No
eight thousand how many number of units
requite thousand 250 we have issued only
400 remaining is there no next just look
at the next alone we have 600 no so
again you can take the six this one 600
at the rate of 19 through pays 50 pies
11700 so how many number units required
by the production department thousand
250 so far we have taken thousand four
hundred from the first one 600 from the
second one total thousand is over
remaining 250 is there no so that 250
can take from the third one 215 each
price 1930s know this multiply to 15 to
19 4000 750 now find out the balance you
have issued 400 600 also to fully
exhausted from thousand three hundred
euro issue 215 now we have balance only
thousand fifty units each price 19 what
is amount nineteen thousand nine fifty
next one on 20th purchased thousand
units
at 20 each so you have to record this
information what is the friends number
goods resale note number on 28th your
purchase no so you have to write the
reference goods received note number as
reference number so how many number of
units purchased thousand no enter is zip
to column thousand units each unit price
20 rupees this multiplied with this
20,000 now you have to show that
balancing finca so already we had
thousand fifty each 19 rupees 19
thousand nine fifty now we have purchase
thousand units now at the rate of 20
rupees 20,000 next on 29th main issue
thousand seven hundred units now we have
to issue thousand seven hundred units
from the balance and twenty nine we are
going to issue thousand seven and units
to production department now you have to
write the reference number material
requisition number you have received no
you have received material requisition
note from the production department you
have to write that reference for the
transaction so how many number of units
you required by the production
department thousand seven hundred units
and see the first one so according to
FIFO method first you have to issue the
first one thousand fifty take this
balance and issue thousand fifty each
price 19 rupees 19 thousand nine fifty
still we need to issue 650 so that you
can take from the second lot and
thousand units are they know from
thousand units you can take six fifty
you have to charge this price because
you have taken from this lot no you have
to charge this price twenty rupees six
fifty into twenty thirteen thousand okay
so what is a balance thousand fifty
fully exhausted fully issued to
production department from thousand unit
you have taken six fifty eight so
remaining three fifty units are they
he joined Christ 20 Rapace know just
multiply and find the amount 7000 into
transaction 30th of May 2015 purchased a
thousand units at 22 rupees each enter
this transaction under received a column
on third tier purchase 2,000 unit known
say after write goods receipt note
number how many number of in purchase
thousand units each unit price 22 rupees
so 22,000 just enter the balance column
just fill the balance column already 350
is there 20 rupees each 7000 amounts and
now we have purchased thousand unit know
each price 22 for 22,000 rupees then
last one on 31st May issued 750 units to
production department 31st you should
know you have to write material
requisition number so how many number of
units 750 you need so according to
before method you have to take from that
first one earliest one 350 is there now
first issue this one 350 20 rupees each
7000 is over so 750 is rate what 350 is
given still we need 400 unit know so
that we can take from the next to load
thousand thousand units are they know
from thousand you can take 400 units 22
rupees
what is amount 8800 so what is the
balance 350 is given 1000 we have issued
400 units remaining we have only 600
units at the rate of 20 to repay so you
need to find out the amount
13200 after entering all these
transaction storekeeper need to write
the closing stop how many number of
units are there in balancing column 600
units each unit price 22 repeats among
13 thousand two hundred
that you need to write here closing
stock 600 units at 22 rupees each amount
rupees 13200 let me explain once again
first you need to show the balancing
figure opening balance thousand two
hundred into twenty rupees and then on
second purchase made six minutes
purchase know that unity record under
reciprocal and six hundred purchased at
a rate of 19 two piece of tea 11700 so
you need to rebalance each and after
finishing each and every transaction you
need to show the balance in figure so
already thousand two hundred 220 now you
have purchased six hundred no total
thousand eight hundred is day and out of
that on fifth they are issued 800 units
to production department so you have to
write like this material requisition
note number hey Janet units no you have
to take from the first one so first one
we have thousand two hundred from
thousand two hundred is issued what is
the balancing figure from thousand two
hundred units you have issued H and at
balancing figure four hundred and second
law 600 is their total thousand lot is
there as balancing figure next on 12 the
purchase made four thousand three
hundred again you have to balance the
item first one four hundred balancing
figure is there and 600 now we have
purchased thousand three hundred so
total 2300 is their out of that on
fifteen thousand 250 units required by
the production department
you cannot take from the thousand three
hundred you have to go according to the
order fee for method now first you need
to take from the first one
four hundred is there you can take the
four hundred and you can issue the six
hundred also total thousand is over
still we need 250 that 250 can take from
the last one balancing figure thousand
fifty at the rate of 19 rupees nineteen
thousand nine fifty on 28 the goods
purchase for how many units thousand
units but you have the rate of twenty
rupees age twenty thousand
you have to balance that she already
thousand fifty is there additional
purchase made thousand total 2050s day
and then on twenty nine ten thousand
seven hundred units required by the
production department and so first unity
take first to long term the first
allotted thousand fifty reminding 650 is
record not that you can issue from the
balancing figures thousand is they
enough one thousand you can take 650
balance thousand - 650 350 then on 30th
you have purchased thousand unity so
already we have 350 and again purchase
made no thousand add total thousand
three fifty units are there from that on
thirty is the step me again 750 units
required by the production department
so from thousand three fifty have to
take the first one 350 balance four
hundred units required no you can take
from a thousand so balance thousand -
400 600 units so closing stock as on
31st May and 600 units at the rate of 22
rupees tota 13200 according to FIFO
method you have to find out closing
stock now I'm going to explain live for
method before means and last in first
out method so I am going to explain
before method with the help of same
problem saying according to Lee for
method the price of material last
purchase and kept in stores is charged
for the issue first and then the
proceeding Lord's purchase are issued
this is a pro simple procedure for Lee
for method according to FIFA we have to
take the first method earliest purchase
will be issued and then we have to press
in a Quantic Ewing system but according
to Lee for method we have to issue the
issue material from the last purchaser
so that is a difference between
FIFO and LIFO let us see the problem
first one opening stop thousand two
hundred units at twenty rupees each 2015
may first balance brought down
how many number of mins add a thousand
two hundred no this enter under balance
column thousand two hundred quantity or
yo Nate
each unit twenty repays know what is the
amount twenty four thousand on second
purchase six hundred units at 99 rupees
fifty paisa each on second may purchase
so the purchase transaction you have the
record goods received notes number Holly
numbers purchase six hundred unit note
that you have to write and up receive
the column six hundred you names at
nineteen through peace 50 pies H 11,700
just write the balance already thousand
two hundred units are there as opening
balance twenty rupees age twenty four
thousand now have purchased six hundred
units at nineteen replace 50 pies age
eleven thousand seven hundred then on
fifth the issued eight hundred units no
for issue you have to write material
requisition number fifth issue to
production department know some material
requisition number how many you is
requirement production department a
tender according to Lee for method you
have to issue from the last lot already
we have thousand two hundred as opening
balance and your perch is six hundred
know from these two lot you have to take
the lock front e last one so last the
six hundred is they know from that you
have to issue so eight hundred unit is
required now enter six hundred you can
issue 19 through piece 50 pies 11700
south of eight hundred six hundred issue
remaining two hundred is they know that
two hundred you can take from the next
one next option after exhausting the
anti I think the next option is thousand
two hundred is they know from thousand
two hundred a can issue two hundred
units total eight and it is over no four
thousand okay so now six hundred is
issued now we have thousand two hundred
200 you have reshoot 200 balance
thousand units are there at 20 rupees
age 20,000 on 12th purchased thousand
300 units at a rate of 19 rupees age
suppose you have to enter the
transaction and I received a column and
12 codes
please say note number how many number
of means purchase thousand three hundred
no just right under receptor : thousand
three hundred endow 19 rupees H
multiplied with this 24,700 just find
out the balancing figure already we had
thousand units at twenty rupees age
twenty thousand now we have made
additional purchase no thousand three
hundred units at 19 - please age twenty
four thousand seven hundred next on May
15th issue thousand 250 units safety
record this information and an issue
column on 15 you have the right material
requisition number for issue so how many
number of units record by the production
department thousand 250 so according to
Lee for method you have to issue from
the last one last in first out thousand
250 at the rate of nineteen rupees each
23 thousand seven fifty what is the
balance thousand is there hidden issue
thousand thousand twenty rupees age
twenty thousand is there from thousand
three hundred we have assured thousand
250 what is the balance fifty units each
unit nineteen rupees what is the amount
950 on 20th purchase two thousand units
at a rate of 20 repeats age say after
record in reciprocal and because your
purchase equate the raw material now so
on 20th the goods received
number how many units thousand units
Center is shipped a column thousand
units at the rate of 20 rupees 20,000
again you have to balance first a lot
thousand rupee thousand units into 20
each 20 thousand is there and fifty
units at the rate of 19 to piece each
950 is there and now we have purchased
thousand units now thousand twenty
rupees each total how many units are
there two thousand fifty units next you
know 29th of May issue thousand seven
hundred units on 29th the unit eh 2700
no fire show you have to write material
requisition number how many units is
required by the production department
thousand seven hundred no according to
Lee for method you have to take from the
last one so thousand lot is there no
thousand unit is there in the last Lord
just take from the last 1000 just issue
the entire thing because you need to
issue thousand seven hundred no thousand
into twenty rupees age twenty thousand
rupees twenty thousand rupees and still
we need to issue seven hundred you have
to go for the next one next option is
fifty you have to issue the entire 59
fifty so how many number of units record
by the production department thousands
on fifty week so far we have issue
thousand fifty no still winning six
fifty that we can take from the last one
from thousand six fifty you have to take
twenty rupees thirteen thousand you have
to write the balance there thousand lot
is issued fifty also issued now we have
only thousand from thousand you have
issued six fifty so balancing figure is
350 units at twenty rupees each seven
thousand rupees next on 30th May
purchased a thousand units at twenty two
rupees H so you have to enter this
transaction under
recipt a column
on 30th the goods received note number
how many number of units purchased
thousand units at the rate of 22 rupees
age 22 thousand balance last balance 350
into 20 rupees age seven thousand now we
have purchased thousand additional
purchased 22 rupees age 22 thousand in
the last one on 31st May issued 750
units say after record is information
under issue column 30 first steps you
have to write material requisition
number for issue so how many number of
units required by the production
department 750 units no according to
leave for method you have to take from
the last lot that is a reason to the
last one is thousand unit know from
thousand you have to issue 750 750 at
the rate of last one 22 rupees each
16500 balance 350 is there within tissue
350 units 20 rupees each seven thousand
and from thousand you have your shirts
on 50 according to leave for method what
is a balance in figure thousand - 150
250 into 22 rupees five thousand five
hundred
now you need to write the closing stock
closing stop is equal to harmony means
350 units add to 15 inch total 600 units
it gained value - just take the total
seven thousand plus five thousand five
hundred 350 into 20 plus 250 into twenty
two what is the total 12,500 there's a
value six hundred units in value 12,500
so according to Lee for method this is a
closing stock now we can compare with
the FIFO method see according to FIFA
method closing stock is six hundred
units are 22 rupees each value
13200 according to Lee for method
closing stock is six honored union but
valued at 12,500 that is a difference
between before and leave for fee for
means first in first out you have to
issue from the first lot earlier Lord
according to Lee for you have to issue
from the last lot Scott Lee for method
last in first out hope you could
understand the FIFO only for method from
this video thank you
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