Inventory System Evaluation and Costing Methods in Business Accounting: A Case Study of Beacon Lighting Group Limited

BUSINESS ACCOUNTING

BUSINESS ACCOUNTING 1
Introduction
Business Accounting is the systematic way of recording, analysing and controlling the
financial information. There are different standards which help the company to record the
different information related to the financial situation of the company. Inventory accounting
standard is one of the accounting standards of the accounting. In this paper, the discussion is
made on the topic of inventory system of the company. Beacon lightning group limited has
been taken into consideration in order to evaluate the inventory system of the company.
Evaluation of Inventory
There are many methods of evaluating of the inventory and these are standard cost, LIFO,
FIFO and Average Cost. But as per the AASB 102, the inventory is evaluated at the lower
cost or net realisable value of the goods. The company also follow the same method to
evaluate the inventory in order to record in the financial statement (ASSB. Gov., 2015). The
company assigned the cost the individual items in order to evaluate the cost of the inventory.
Cost of inventories of the company includes the all types of cost such as cost of purchase,
cost of conversion and the other (Boundless Accounting, 2018).
(Beacon Lighting Group Limited, 2018)
As per the annual report of the company, the cost of the inventory is $79,402,493 and the net
realisable value is $94,537 in the year 2017. The company also include the provision of stock

BUSINESS ACCOUNTING 2
of obsolesce in the evaluation of inventory. The evaluation of the company reflects that the
company also follow the accounting standard 102 in order to evaluate the inventory.
Inventory System used by the company
There are two types of inventory system which can be used by the company and these are
periodic and perpetual inventory system. Beacon lighting group is an electronic company
which offers the lighting products in Germany, Hon Kong, United States and many others.
The company is a retailing company of lighting products which has many stores that is why it
is essential to evaluate the inventory of per day. Perpetual method is an appropriate method
for the company. The company applied the perpetual method in order to evaluate the
inventory system (Accounting Tools, 2018a).
Advantage
The method is beneficial for the company in order to evaluate an appropriate amount of
inventory. This method allows the company to centralise the inventory system so that they
have the information related to the asset. This method provides the accurate amount of the
inventory to the company in related to their inventories by evaluating the inventory on the
daily purpose.
Costing Methods
There are four costing methods that can be used by the company to evaluate the cost of
inventory. LIFO, Weighted Average, FIFO, and Specific identification are the four methods
that the company used to evaluate the cost of inventory.