Business Accounting: Valuation of Inventory in Linfox Transport

Business Accounting

LINFOX TRANSPORT 1
Introduction
Business accounting is the process of analysing, monitoring, evaluating the financial
statement of the company. Each and every company manage their financial statement in order
to analyse the financial position of the company. The company follows the different
accounting standards in order to adjust the different items. In this report, the discussion is
made on the topic the valuation of inventory of the company. In this report, Linfox Transport
has been taken into consideration to evaluate the value of inventory.
Measurement of Inventory
As per the AASB 102, inventories are valued as the lower of cost or net realisable value of
goods. Linfox Transport also follows the same method in order to maintain the inventory in
the financial statement. The company includes the purchasing cost, freight charges and the
other installation charges in order to evaluate the appropriate value of inventory (Weygandt,
Kimmel, and Kieso, 2015).
(Source: Linfox Transport, 2017)

LINFOX TRANSPORT 2
As per the financial report of the company, it has been seen that the company record the value
of inventory in the consolidated statement of the financial position with the amount of $140.8
million. The company states this information in “note 10” of the company annual report of
2017. The value of inventory of the company reflects that the company follows the
accounting standard 102.
Inventory system of the company
Periodic and Perpetual are the two system of inventory which can be applied by the
companies in order to record the value of inventory in their financial statement. Periodic
System states that the company record the inventory in the financial statement as per the
quarterly basis (Axsäter, 2015). But in the perpetual method, that the company records the
inventory in the financial statement on the daily basis. As the company operates the 1100
retail stores which reflects that it has the high value of inventory. It is necessary for the
company to maintain the value of inventory on the daily basis for the effective (Axsäter,
2015)
Advantage
Perpetual method is useful for the company to measure the appropriate amount of inventory
in order to record in the financial statement. This method is beneficial for the company to
evaluate the accurate amount of the inventory. It reduces the chances of theft and uncovers
shrinkage by recording the valuation of inventory (Accounting Tools, 2018).
Costing Method
FIFO, LIFO and the Weighted Average Method are the three methods which can be used by
the companies in order to evaluate the value of inventory. It has been seen that the company
is also applied this method in the company in order to evaluate the value of the inventory.