Prepare a Stores Ledger Account showing the receipts and issues, pricing the materials issued in the basis of Weighted Average.

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Understand the Problem

The question involves preparing a Stores Ledger Account based on given receipts and issues of Material X, using the Weighted Average method to price the materials issued.

Answer

Remaining balance: 400 units; Total cost: Rs 1610.
Answer for screen readers

The total remaining balance is 400 units with a total cost of Rs 1610.

Steps to Solve

  1. Calculate Total Units and Total Cost for Each Receipt

    To prepare the Stores Ledger, first sum up the total units and the total costs for each receipt:

    • Opening Stock:
      • Units: 200
      • Cost: $200 \times 3.50 = 700$
    • Purchase on October 3:
      • Units: 300
      • Cost: $300 \times 4.00 = 1200$
    • Purchase on October 13:
      • Units: 900
      • Cost: $900 \times 4.30 = 3870$
    • Purchase on October 23:
      • Units: 600
      • Cost: $600 \times 3.80 = 2280$

    The total units and their respective costs will be added to calculate the Weighted Average.

  2. Compute Weighted Average Cost per Unit

    The total units and costs are:

    • Total Units: $200 + 300 + 900 + 600 = 2000$
    • Total Cost: $700 + 1200 + 3870 + 2280 = 8050$

    Now, calculate the Weighted Average Cost per unit: $$ \text{Weighted Average Cost} = \frac{\text{Total Cost}}{\text{Total Units}} = \frac{8050}{2000} = 4.025 $$

  3. Record Issues and Calculate Cost of Issued Units

    For the issues, apply the Weighted Average Cost calculated:

    • On October 5: 400 units issued
      • Cost: $400 \times 4.025 = 1610$
    • On October 15: 600 units issued
      • Cost: $600 \times 4.025 = 2415$
    • On October 25: 600 units issued
      • Cost: $600 \times 4.025 = 2415$

    Total units issued are $400 + 600 + 600 = 1600$ with a total cost of $1610 + 2415 + 2415 = 6440$.

  4. Prepare the Stores Ledger Account

    Now, compile the information into a Stores Ledger format:

    Date Particulars Units Price per Unit Total
    Oct 1 Opening Stock 200 3.50 700
    Oct 3 Purchased 300 4.00 1200
    Oct 13 Purchased 900 4.30 3870
    Oct 23 Purchased 600 3.80 2280
    Total 2000 8050
    Oct 5 Issues 400 4.025 1610
    Oct 15 Issues 600 4.025 2415
    Oct 25 Issues 600 4.025 2415
    Total 1600 6440

    The remaining balance can also be calculated.

  5. Calculate Remaining Balance

    Remaining Units = Total Units - Total Issued Units
    $$ \text{Remaining Units} = 2000 - 1600 = 400 $$

    Total Cost Remaining = Total Cost - Total Cost Issued
    $$ \text{Remaining Cost} = 8050 - 6440 = 1610 $$

    Therefore, the final Stores Ledger Account reflects the receipts, issues, and balance.

The total remaining balance is 400 units with a total cost of Rs 1610.

More Information

The Stores Ledger Account reflects proper tracking of materials and their costs. This method helps in maintaining accurate financial records and inventory management.

Tips

  • Confusing the total cost calculation for individual purchases; ensure to multiply units by the correct price per unit for each entry.
  • Failing to update the remaining units after issues; always calculate the remaining stock correctly.
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