| Gross means what? | Inclusive |
| Net means what? | Exclusive |
| What should the cost of inventory include? | The cost of purchase, cost of conversions, cost of transport of the purchases. |
| What are the key accounting standards examinable in this paper relating to inventory? | IAS 2 |
| How should inventory be valued? | The lower of cost and net realisable value. |
| How is the Net Realisable Value (NRV) calculated? | Selling price less any extra costs that there are in order to get the goods in a sellable state. |
| What is Cost in terms of inventory? | The cost of getting the goods to the state that they are in. |
| In accordance with IAS 2, which methods of inventory valuation are acceptable? | FIFO and AVCO |
| How should a dishonoured check be recorded in the receivables ledger account? | It should be recorded as DR in the receivables account because it would have previously been deducted from the account. |
| When should a provision be recognised? | When:
1) There is a present obligation as a result of a past event
2)There is a probability of an outflow of resources to settle the obligation
3) There is a reliable estimate of the amount of obligation. |
| What is the difference between provisions and other liabilities? | There is an uncertain timing or amount of expenditure with provisions. |
| How are provisions accounted for? | Dr. Expenses (SPL)
Cr. Provisions (SFP) |
| How should contingent liabilities be disclosed/recognised in the financial statements? | They should *not* be recognised, but rather disclosed, unless there is only a remote possibility of needed to fulfil the possible obligation. When there is only a remote chance, then it is not even disclosed. |
