Unit 2 - Area of Study 1: Accounting for inventory

Outcome 1

Record and report for inventory and discuss the effect of relevant financial and non-financial factors, and ethical considerations, on the outcome of business decisions.

Examples of lear​ning activities

• Design appropriate financial documents for use by a trading business.
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  Complete inventory cards for a business using either spreadsheets or manual methods. Record this financial information in a special journal and prepare financial reports from this data.
• Justify the selection of a specific cost assignment method (either FIFO or Identified Cost) for a range of businesses.
• Explain the key difference between an Income Statement for a service business and a trading business.
• For a specific case study, prepare a list of strategies intended to minimise inventory loss.
• Use a case study to demonstrate and explain the importance of a business holding an appropriate mix of inventory. Explain the importance of maintaining appropriate Inventory levels for a business.
• Visit a local business. Examine the types of inventory held and sold. Identify the purposes behind each type of inventory held. Identify the type of inventory management issues this business might encounter; for example, complementary goods.
• Calculate the Inventory Turnover Ratio for a specific business. Compare the figures with similar businesses as well as the Industry Average.
• Identify, justify and provide examples of non-financial data that a business should consider in relation to the management of inventory.
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  Using a case study, explain the ethical considerations that may affect business decision-making and provide recommendations that an accountant could make to the business’ management.
• Watch the program War on Waste on ABC iview to stimulate discussion about ethical considerations.