MA.4:5.1 - One period with zero opening balances
A constructed service-manufacturing account starts with zero inventory, receivables and payables and includes only the transactions described below. During the period it produces 100 units, spending 200 on materials and 300 on production-resource supply. All 500 is paid in the period. It sells 60 units at 10, recognizes revenue of 600 under the supplied policy and receives 400; the remaining 200 is receivable.
Under the example’s supplied full-production-cost policy, eligible cost is 500, or 5 per unit. Cost of the 60 units sold is 300, closing inventory is 200 and the reported result is 600 − 300 = 300. The cash movement is 400 − 500 = −100.
An internal throughput-style account carries only materials in inventory and expenses the 300 resource supply in the period. Materials in the 60 sold units cost 120; closing material-valued inventory is 80. Its result is 600 − 120 − 300 = 180.
The accounts connect explicitly:
| Connection | Calculation | Result |
|---|---|---|
| Internal result to the supplied full-cost result | 180 + 120 of production-resource cost retained in closing inventory | 300 |
| Full-cost result to cash movement | 300 − 200 increase in inventory − 200 increase in receivables | −100 |
| Internal result to cash movement | 180 − 80 increase in material-valued inventory − 200 increase in receivables | −100 |
The 120 difference is a recognition and valuation effect under the supplied policies. It is not another cash receipt. The unpaid customer balance and closing inventory explain why either positive result coexists with negative cash movement.
An actual reporting use must establish the applicable capitalization, recognition and measurement rules. The example supplies its policies to demonstrate the reconciliation.