Recording inventory

In this lesson

1. 0:00 Recording inventory and the accruals concept
2. 2:16 Worked example: calculating cost of sales
3. 3:31 Impact of inventory on financial statements
4. 4:06 Journal entries for opening inventory
5. 5:24 Journal entries for closing inventory
6. 6:28 Complete illustration: Berlin's inventory journals

About this lesson

sales, and transferring closing inventory back out. Understanding this is essential for Financial Accounting (FA) and Financial Reporting (FR) papers, as inventory affects both your Statement of Financial Position and Statement of Profit and Loss. You'll work through practical examples so you can confidently handle inventory in your own calculations. The core principle is straightforward: cost of sales equals opening inventory plus purchases minus closing inventory. Any inventory not sold during the period shouldn't reduce profit — it's carried forward as a current asset to be matched against next period's sales. The video walks you through the ledger entries step by step, showing why you debit cost of sales when removing opening inventory, and credit cost of sales when recording closing inventory. You'll see how these adjustments flow through both financial statements, and why getting inventory right directly impacts the figures your examiners will be checking.

Duration: 9m