Accounting Abacus Ltd undertook the following transactions during May 2022. May. 1 Purchased $18,480 inventory; terms 1/10, n/30. 8 Returned $1,980 of the inventory purchased on May 1. 16 Sold inventory on credit for $8,745. Cost of the inventory sold was $5,700. Required: a) Prepare the journal entries to record the transactions using periodic inventory system. GST apply, and assuming that all the prices are GST inclusive. b) Prepare the journal entries to record the 8th and 16th transactions using perpetual inventory system. Ignore GST.

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.