Page 27 - Accountancy for Advanced Secondary Schools Teachers Guide Form Five

Chapter teaching guide:
Here are the primary points to address on this chapter:

1. Basic concepts and terminology
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(a) Types of inventories: Explain the different types of
inventories, such as raw materials, work-in-progress (WIP),
and finished goods.
(b) Inventory systems: Describe perpetual vs. periodic inventory
systems, highlighting the differences in how the inventory
data are recorded and updated.

2. Inventory valuation methods

(a) FIFO (First-In, First-Out): Discuss how the cost of the
earliest goods purchased is used in calculating the cost of
goods sold (COGS) and its impact on financial statements.

(b) LIFO (Last-In, First-Out): Explain how the cost of the
latest goods purchased is used in COGS and the implications
for tax and financial reporting, particularly in inflationary
environments.

(c) Weighted average cost: Describe how the average cost of all
items available for sale during the period is used to determine
COGS and ending inventory.

3. Impact on financial statements

(a) Statement of financial position: Discuss how inventory is
reported as a current asset and its significance.

(b) Statement of profit or loss: Explain how COGS affects
gross profit and net income, and the implications of different
inventory valuation methods on these figures

Teacher’s Guide Form Five
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ACCOUNTANCY_TG_2024_FINAL DUMMY.indd 13 23/06/2024 17:45