Comprehensive Report on Financial Transactions Inventory System

This report provides an overview of a financial transactions inventory system, focusing on the First In First Out (FIFO) method. It discusses the verification of inventory documents like requisition slips and purchase invoices, highlighting the importance of the store ledger for tracking sales, purchases, and available balances. Typical errors in inventory processing, such as incorrect entries and omissions, are addressed, along with industry practices like FIFO and weighted average methods. The report also covers securities related to payments for inventories, emphasizing cheque payments and audit trails. Finally, it outlines the posting of inventory journal entries and the recording of inventory balances in the store ledger, inventory account, profit and loss statement, and balance sheet.

FINANCIAL TRANSACTIONS

INVENTORY SYSTEM
The inventory system which is available to the business for recording the
transactions of the business is the First In First Out (FIFO) system. As per this
system, inventory which are first to come in are cleared first. The method is
appropriate for keeping a track of the inventory stock available to the
business and also keep a track of which stock is to be cleared first.

FIFO SYSTEM

VERIFICATION OF
INVENTORY DOCUMENTS
• The inventory documents such as requisition slips, order slips, reorder level
slip are to be considered. In addition to this, the purchase invoices relating
to inventory of the business is also to be verified by the business.
• The management can also get vital information from the store ledger which
is prepared on FIFO basis regarding sales, purchases balance available for
the business both in terms of volume and rate charged.

TYPICAL ERRORS IN
PROCESSING OF INVENTORY
• The typical errors which can happen are wrong entry of inventory in the
ledger accounts or wrong posting of purchase order which can cause
serious variances.
• Another error which is common is the error of omitting certain transactions
and balancing the value which gives in appropriate results for the business.

INDUSTRY CODE OF
PRACTICE
In most of the businesses which are operating in the industry the common
practice which is followed by most is either FIFO Basis or Weighted Average
basis for measuring the inventories of the business. Therefore the common
practice in the industry is the two methods.

SECURITIES RELATED TO
PAYMENTS FOR
INVENTORIES• The inventories are made payments on cheque basis as the same is also
recoded in bank statement which helps in verification process at the end of
the month.
• In addition to this, cheque mode of payment is safe and the same creates a
audit trail which can help the auditor of the business.

POSTING OF INVENTORY JOURNAL

RECORDING OF INVENTORY
The balances of inventory is a crucial part of the business and the same are
recorded and shown in following:
• Store ledger
• Inventory account
• Profit and loss statement
• Balance sheet.

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