Page 259 - Microsoft Word - 00 BA3 IW Prelims STUDENT.docx

Accounting for inventory

Example 2: Solution (cont.)

3 Continuous AVCO basis

With this inventory valuation method we work out an updated
average cost per unit each time a purchase of inventory is made.
Any subsequent sales are accounted for at that average cost per
unit until the next purchase is made and a new average cost per
unit is calculated.

The best way to deal with this is to prepare a schedule dealing with
transactions in date order as follows:

253