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Pick the correct stock concept (among those within brackets) - NSC Accounting - Question 2 - 2016 - Paper 1
Question 2
Pick the correct stock concept (among those within brackets). Write the correct answer next to each number (2.1.1 - 2.1.4) in the ANSWER BOOK. 2.1.1 The (first-in-f... show full transcript
Worked Solution & Example Answer:Pick the correct stock concept (among those within brackets) - NSC Accounting - Question 2 - 2016 - Paper 1
Step 1
2.1.1 The (first-in-first-out / weighted average) stock valuation method will record closing stock at the most current stock prices.
Answer
The correct answer is 'weighted average'. This method takes into account the average cost of goods available for sale and is more reflective of current market prices.
Step 2
2.1.2 The (first-in-first-out / weighted average) method is more relevant for low-cost stock items that are purchased on a more regular basis.
Answer
The correct answer is 'first-in-first-out'. This method is suitable for low-cost items by ensuring that older inventory is sold first, which is often applicable to perishable or quickly outdated products.
Step 3
2.1.3 The (first-in-first-out / specific identification) valuation method is suitable for very expensive, individually identifiable stock items.
Answer
The correct answer is 'specific identification'. This method tracks each specific item in inventory and is ideal for high-value items such as artwork or expensive electronics.
Step 4
2.1.4 The (periodic / perpetual) stock system records the cost of goods sold at the point of sale.
Answer
The correct answer is 'perpetual'. This system continuously updates inventory records in real-time, allowing businesses to track inventory levels and cost of goods sold instantaneously.