INVENTORIES
Inventories of a government entity consists of the ff.:
a. Held for Sale
i. Medicines for sale in government pharmacies
Merchandise Inventory xx
Accounts Payable xx
b. Held for Distribution
i. Rice and other welfare goods held for distribution
Welfare Goods for Distribution xx
Accounts Payable xx
c. Held for Manufacturing
i. Raw Materials
ii. Work-in-process
Raw Materials Inventory xx
Accounts Payable xx
d. Held for Consumption
i. Office supplies Inventory
Office Supplies Inventory xx
Accounts Payable xx
e. Semi-expendable Property
i. Machinery
ii. Equipment
iii. Furniture and fixtures
iv. Other similar items not capitalized as PPE (cost below P15,000 capitalization
threshold for PPE)
Semi-expendable Machinery (Property) xx
Accounts Payable xx
Initial Measurement
– At cost
Subsequent Measurement
Held for Sale Lower of Cost and Net Realizable Value
Estimated Selling Price xx
Estimated Cost of Completion (xx)
Estimated Selling (Disposal) Cost (xx)
Impairment Loss – Inventories xx
Merchandise Inventory xx
eyelielayi08@gmail.com
Held for Distribution Lower of Cost and Current Replacement Cost
Cost entity would incur to acquire the asset on
the reporting date
Impairment Loss – Inventories xx
Welfare Goods for Distribution xx
Inventories Received from Non-Exchange Transactions Fair Value
Agricultural Produce Fair Value less Cost to Sell
Cost comprises:
Purchase Cost
Excluding:
Trade Discounts
Rebates
Other Similar deductions
Direct Cost
Incurred in bringing the asset to its intended location and condition
Freight Costs
Conversion Costs
Cost excludes:
Abnormal amounts of:
Wasted Materials
Labor
Production Overhead
Selling Costs
Administrative OH
Cost Formulas:
For COGS and ending inventories
a. Specific Identification
a. used for items that are not ordinarily interchangeable and those that are segregated
for specific purpose
b. specific costs are attributed to identified items of inventory
c. COGS represents the actual costs of the specific items sold
d. Ending Inventory represents the actual costs of the specific items on hand
b. Weighted Average Cost
a. used for larger numbers of items of inventory that are ordinarily interchangeable
eyelielayi08@gmail.com
b. applied under perpetual inventory system
c. a new weighted average unit cost is computed after every purchase
NOTE: FIFO cost formula and Periodic Inventory System are NOT USED by government entities
Recognition as an Expense
o CA of inventory is recognized as expense in the period it is sold, distributed, exchanged or
consumed
o Write-down of Inventory to its NRV or Current Replacement Cost, as appropriate, is also
recognized as expense
Receipt Inventories
1. Purchase Request (PR) form
a. Prepared by end users to request for the purchase of items not available on stock
b. Basis in preparing the Purchase Order
2. Purchase Order (PO)
a. Prepared by authorized official issued to the supplier when making a purchase
b. Indicates the specifications, quantities and agreed prices of the items being purchased
c. Serves as the contract between the entity and the supplier
3. Delivery Receipt (DR); Inspection and Acceptance Report (IAR)
a. Signed by the Property/Supply Division when purchased items are delivered and
prepares the IAR that will be used by the Property Inspector in inspecting and accepting
the delivered items
4. Property Inspector
a. Inspects the conformance of the delivered items and indicates the result of the
inspection in the IAR
b. Rejected deliveries are returned to supplier
c. Forwards the copies of DR, IAR and PO to both Property/Supply Division and
Accounting Division for recording
5. Stock Card (SC)
a. Property/Supply Division through the SC keeper records the accepted deliveries
b. Shows the quantities of all receipts and issuances of inventory, as well as the available
balance at any given point of time
6. Supplies Ledger Card (SLC)
a. Accounting Division records the accepted deliveries
b. Shows both the quantities and monetary amounts of all receipts and issuances of
inventory, as well as the available balance at any given point of time
c. Periodically reconciled with the Stock Card (SC)
7. Disbursement Vouchers (DV)
a. Prepared by the Property/Supply Division then forwarded with the Accounting Division
for processing of payment
eyelielayi08@gmail.com
Disposition of Inventories
8. Requisition and Issue Slip (RIS)
a. Prepared by end users to request for the issuance of items available on stock
b. Approved by the Head of the Requesting individual then forwarded to the
Property/Supply Division
9. Report of Supplies and Materials Issued (RSMI)
a. Prepare by the Property/Supply Division
b. Used by the Stock Card Keeper in updating the SC and by the Accounting Division in
journalizing items issued
10. Accounting Division
a. Records the items issued in the books of accounts and updates SLC
11. Other Documents
a. Waste Materials Report
Reports wasted materials such as destroyed spare parts and other spoilages
b. Report on Physical Count of Inventories
Report the results of physical count
Shows the balance of Inventory, as well as any shortages and overages
c. Report on Accountability for Accountable Forms
Reports the movement and status of accountable forms in possession of an
officer
d. Inventory Custodian Slip
Prepared when issuing semi-expendable property
eyelielayi08@gmail.com
