Enter the following transactions in the Stores Ledger of Material Y using FIFO method.

Understand the Problem

The question is asking to enter a series of inventory transactions into a Stores Ledger for a specific material using the FIFO (First-In, First-Out) method. This involves tracking the quantities and prices of units as they are issued and received.

Answer

Final Ledger: 230 units @ Rs 11/unit, 60 units @ Rs 12/unit.

Steps to Solve

Initial Balance Entry
The ledger starts with a balance of 250 units at Rs 10 each.
- Balance: 250 units @ Rs 10/unit
Issuing 50 Units (January 3)
50 units are issued. According to FIFO, these will come from the initial balance.
- Remaining Balance: 250 - 50 = 200 units @ Rs 10/unit
Receiving 800 Units (January 6)
800 new units are received at Rs 11 each.
- Total Inventory after Receipt:
  - 200 units @ Rs 10/unit
  - 800 units @ Rs 11/unit
Issuing 300 Units (January 7)
300 units are issued, starting from the oldest inventory (FIFO).
- First, 200 units @ Rs 10/unit are issued, then 100 units @ Rs 11/unit.
- Remaining Balance:
  - 700 units @ Rs 11/unit (800 - 100)
Returning 20 Units to Stores (January 8)
20 units are returned to inventory from the issued amount (assumed at Rs 11 as they are the most recent).
- Total Inventory:
  - 700 units @ Rs 11/unit
  - 20 units @ Rs 11/unit (returned)
Receiving 300 Units (January 12)
Another 300 units are received at Rs 12 each.
- Inventory breakdown:
  - 720 units @ Rs 11/unit
  - 300 units @ Rs 12/unit
Issuing 320 Units (January 15)
320 units are issued; they will be taken from the existing inventory in FIFO order.
- First, 720 units @ Rs 11/unit, issue 320 units fully from this batch.
- Remaining Balance:
  - 400 units @ Rs 11/unit
Receiving 100 Units (January 18)
100 units are received at Rs 12 each.
- Total Inventory after Receipt:
  - 400 units @ Rs 11/unit
  - 100 units @ Rs 12/unit
Issuing 120 Units (January 20)
120 units are issued. These will come from the oldest batch first.
- 120 units from 400 units @ Rs 11/unit.
- Remaining Balance:
  - 280 units @ Rs 11/unit
  - 100 units @ Rs 12/unit
Returning 40 Units to Vendors (January 23)
40 units from the last receipt are returned.

New balance of the latest receipt becomes 60 units @ Rs 12/unit.

Receiving 200 Units (January 26)
200 units are received at Rs 10 each.

Total Inventory:
- 280 units @ Rs 11/unit
- 60 units @ Rs 12/unit
- 200 units @ Rs 10/unit

Issuing 250 Units (January 30)
250 units are issued. They will be taken FIFO: first from Rs 10, then from Rs 11.

First 200 units @ Rs 10
Then 50 units from Rs 11
Remaining Balance:
- 230 units @ Rs 11/unit

The final balances in the Stores Ledger for Material Y using FIFO are:

230 units @ Rs 11
60 units @ Rs 12

More Information

FIFO (First-In, First-Out) is a method to manage inventory, ensuring that the oldest stock is used first. It is especially crucial in industries where products might have expiration dates.

Tips

Not following FIFO properly, which may lead to incorrect inventory valuation.
Failing to update inventory levels accurately after each transaction.
Confusing returns with issues or receipts, leading to double counting or missing transactions.

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