The business transaction of Tata Motors as follows: The business uses periodic inventory system. 5th May 2019 : Purchased RO30,000 of merchandise inventory from Sky motors : terms 2/15, n 45, (Invoice no. 201) 11th May 2019: Purchased RO20,000 of merchandise inventory from Moon Motors terms 5/20, n 45, (Invoice no. 651) 20th May 2019 : Purchased RO40,000 of merchandise inventory from Heaven Motors terms 5/20, n 45, (Invoice no. 107) 28th May 2019: Full payment was made to Moon Motors 29th May 2019: Goods returned to Heaven Motors RO10,000 30th May 2019 : Purchase merchandise from Start Motors and paid cash immediately. RO 5,000 Which of the following journal entry is correct on 28th May 2019? a. Debit : Moon Motors RO 20,000 Credit Cash RO 19,000 Credit : discount RO 1000 b. Debit : Cash RO 19,000 Debit : Discount RO 1000 Credit : Moon Motors RO 20,000 c. Debit : Moon Motors RO 19,000 Credit Cash RO 19,000 d. Debit : Moon Motors RO 20,000 Credit Cash RO 20,000

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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.