How to Use Stock Cards for Sales & Purchases

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  • 0:04 First In/First Out
  • 0:34 Stock Cards
  • 1:22 Steps to Complete
  • 3:31 Lesson Summary
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Lesson Transcript
Instructor: Martin Gibbs

Martin has 16 years experience in Human Resources Information Systems, has a PhD in Information Technology Management, and a degree in Information Systems Management. He is an adjunct professor of computer science and computer programming.

What is in is out again. This lesson applies the first-in/first-out (FIFO) method of inventory and explains how to use stock cards to track sales, purchases, and returns of stock.

First In/First Out

What goes in, must go out. For example, if you sell cheese, would you sell only the cheese that you just received and let the earlier product mold on the shelf? A common way to keep track of inventory is the first-in/first-out (FIFO) method, or selling the oldest products first. In other words, if we bought 5,000 sour gummy bears in January, and then bought 500 more in February, we'd have to sell and account for the unit cost for the January items first.

Stock Cards

In FIFO accounting, one option of keeping track of inventory is the stock card, a document that tracks purchases, sales, returns, and other drawings. It tracks the unit price and inventory counts.

Let's consider the following sour gummy bear transactions for July. To further our understanding, we've included only the unit price of the goods, or how much an item costs per unit. Typically, we'd log the actual sale price in other accounts, but our focus here is solely on the stock card.

Date Transaction Qty Unit Cost Amount
July 1 Inventory On Hand 10 1.75 17.50
4 Purchase from Wonka's Wholesale Invoice 23 250 1.90 475
10 Sales - Invoice 933 180 2.25 405
12 Purchase from Wonka's Invoice 25 250 2.25 228
20 Returned to Wonka's AN3 25 1.90 47.50
21 Sales - Invoice 934 210 2.25 525
22 Sales Return to Customer AN12 5 2.25 11.25
30 Withdraw product for advertising 5 2.25 11.25
31 Withdraw product for personal use 5 2.25 11.25

This table shows our transactions, but we need to see how the units flowed in and out of inventory, and their price when they were flowing in and out. This is where the stock card comes in handy, as it allows for more detail and tracks the flow of goods in and out of a company.

Steps to Complete

Stock card FIFO

The header for the stock card has more categories than the table, such as ''In'' and ''Out'' with subcategories under each and a ''Balance'' column to record costs and quantities. Stock cards can be created fairly easily and quickly using Microsoft Excel or other accounting software. Let's fill out the stock card based on the given purchases, sales, and drawings data using the FIFO method.

Check out the July 10th sales. Assume that the first 10 items are the first ones we'll sell. That means we'll also have to take into consideration the unit cost at that time ($1.75), while the rest of the items will have the new unit cost ($2.25).

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