- 20 Marks
FA – L1 – Q54 – Inventory
Define inventories and net realisable value under IAS 2 for AfraHealth Ltd.
Question
(A) Under IFRS Accounting Standards, IAS 2 deals with inventories. Define the following terms:
(i) Inventories
(ii) Net realisable value
(A) AfraHealth Ltd. controls its creditors’ accounts by preparing monthly creditors’ ledger control account in two parts, Upper and Lower Regions.
The following figures were available as at January 31st 20X9 when there was a difference of GH¢3,000 on the Trial Balance.
| Upper Region | GH¢ | Lower Region | GH¢ |
|---|---|---|---|
| Credit Balance b/d | 15,600 | Credit Balance b/d | 10,200 |
| Debit Balance b/d | 2,500 | Debit Balance b/d | 284 |
| Purchases | 115,200 | Purchases | 18,500 |
| Returns | 8,000 | Returns | 1,400 |
| Charges | 800 | Charges | 120 |
| Bank | 30,500 | Bank | 15,200 |
| Discount | 2,500 | Discount | 1,520 |
| Balance c/d | 1,500 | Balance c/d | 1,300 |
On 31st January, 20X9 the officer in charge of Upper Region Ledger declared GH¢89,600 while that of Lower Region declared GH¢15,016.
You are required to:
(i) Prepare creditors ledger control account for the Upper and Lower Regions respectively.
(ii) Draw any conclusion you can from the two control accounts.
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