-b

ob
w.u

ww

ww

ob
w.u

om

w
ww

h.c
b-b

.uo

-b

-b

ob
w.u

.uob
ww

ww
om

h.c
b-b

o
w.u
w
w

-b

ob
w.u
w
w

w
m

h.co
b
.uob

Accounting,
4E
ww
w
Chapter 9 Notes

.com
.com
h
h
b
b
.uob Inventory Systems:
.uob
w
w
ww
ww

-b

.com
h
b
b-

o
w.u
w
w

om

w.u
ww

o
w.u
w
w

.com
.com
h
h
b
b
bPerpetual - keeps.uaocontinuous
record of inventory
.uob on hand
w
w
w annual physical inventory
- wan
ww is still required

.com entries for Purchases

.comand Sales of Inventory:
.com
Journal
h
h
h
b
b
b
.uob
.uob
.uob
w
w
w
w
ww
ww
Perpetual w
System
Credit Purchases

Inventory
Accounts
Payable
.com
.com
h
h
b
b
Credit Sales
To- record sale of merchandise:
.uobAccounts Receivable
.uob
w
w
ww
ww
Sales

om
bh.c

ob-

w.u
ww

om

ww

To record
.comcost of merchandise:
.com
h
h
b
b
- of Goods Sold obCost
.uob
.u
w
Inventory www
ww
End of Period
Entries

.c
-bh
b
o
w.u

h.co
b
.uob
ww

.com
.com
h
h
b
b
.uob No entries required
.uob
w
w
ww
ww

om

h.c
b-b

.uo

w
ww

.uo

COGS:

w
ww

.com
h
b
b-

w
ww

h.co
b
b

.uo

.uo

.uo

w
ww

w.u
ww

.uo

w
ww

.uo

om

.uo

h.co
b
b

om

w.u
ww

.com
h
b
b-

w
ww

.uo

.com
h
b
b-

Page 1

w.u
ww

h.c
b-b

w.u
ww

o
w.u
w
w

h.co
b
b

.uo

w
ww

om

o
w.u
w
w Periodic System

om

h.c
b-b

.uo

w
ww

Purchases
Accounts Payable
om

h.c
b-b

w.u
Accounts
ww Receivable
Sales
.com
h
b
No entry
required
.uob
w
ww

om

w
ww

h.c
b-b

.uo

om

h.c
b-b

.uo

w
ww

Transfer Beg. Inv. Bal. To COGS:

Cost of Goods Sold
m
Inventory h.co

om

.c
-bh
b
o
.u

b-b

o
w.u
w
w
Record
End. Physical Inventory:
w
ww
Inventory
Cost of Goods m
Sold

om

h.c
b-b

o
Transfer
w.ucost of purchases to

.c
-bh
b
o
.u

ww

Cost of Goods Sold

Purchases om

bh.c
ob-

om

h.c
b-b

.uo

w.u
ww

w
ww
m

h.co
b
b

o
w.u
w
w

om

h.c
b-b

om

h.c
b-b

om

h.c
b-b

ww

h.c
b-b

w
ww

h.c
b-b

w
ww

om

.uo

w
ww

om

h.c
b-b

w
ww

.com
h
b
b-

h.c
b-b

.com
h
b
ob-

om

.c
-bh
b
o
.u

ww

Periodic - does not keep a continuous record of inventory on hand

- physical inventory is required at least once a year

h.c
b-b

om

h.c
b-b

om

h.c
b-b

.uo

w
ww

om

w.u
ww

h.c
b-b

w
ww

.uo

.com
h
b
b-

-b

ob
w.u

ww

ww

ob
w.u

om

w
ww

h.c
b-b

.uo

-b

-b

ob
w.u

.uob
ww

ww
om

h.c
b-b

o
w.u
w
w

-b

-b

ob
w.u
w
w

w
m

h.co
b
.uob

Accounting,
4E
ww
w
Chapter 9 Notes

.com
.com
.com
h
h
h
b
b
b
uob of Goods Sold (Periodic
.uob Determining the
.Cost
.uob System):
w
w
w
ww
ww
ww
Beginning Inventory Balance
+ Purchases
m o f Goods Available.cfor
omSale
=
.coCost
.com
h
h
h
b
b
b
- - Ending InventoryobBalance
.uob
.u
.uob
w
w
w
= Cost o f Goods
ww
ww Sold
ww

om

om

h.c
b-b

w.u
ww

.c
-bh
b
o
.u

ww

.com
h
b
ob-

w.u
ww

om

h.c
b-b

o
w.u
w
w

om

h.c
b-b

w.u
ww

h.co
b
b

.uo

w
ww

.com
.com
.com
.com
.com
Inventory
Costing
Methods:
h
h
h
h
h
b
b
b
b
b
.uob
.uob
.uob
.uob
.uob
w
w
w
w
w
w Cost - Cost method
ww
wwbased on the specific cost
wwof particular units of ww
(1) SpecificwUnit
inventory
(2)om
Weighted Average Cost om
- Cost method based on the weighted average costom
of inventory
.c
.c during the period bh.com
.c
.com
h
h
h
h
purchased
and
held
b
b
b
b
bbob- purchased) are the .uob.uob (3) FIFO - Cost
.uomethod
.uocosts
.uunits
by
which
the
first
into
inventory
(first
w
w
w
w
w
ww
ww
wwcosts out t o cost of goods
wwsold (first units sold). w
first
Ending Inventory consists w
of
the most recent purchases.
(4)
LIFO
- Cost methodcoby
into
inventory (last units purchased)
m
.co
. mwhich the last costs
.com
.com are the
.com
h
h
h
h
h
b
b
b
b
b
-t o cost of goods sold (first
- units sold). Ending Inventory
first cost out
consists of
.uob
.uob inventory and thewearliest
.uob purchases made. w.uob
.uob
w
w
w
the
beginning
w
w
w
w
w

om
Accounting
Principals and
.com
.cConcepts:
.com
.com
.com
h
h
h
h
h
b
b
b
b
b
.uob
.uob
.uob
.uob
.uob
w
w
w
w
w
ConsistencywPrinciple
- a business should
w
w
ww
ww use the same accounting
wwmethod and procedureswfrom
period to period.

om report enough information

Disclosure
Principle - a business
.com
.com financial statements
.cmust
.com for
.com
h
h
h
h
h
b
b
b
b
b
outsiders
decisions
ob- about the business.
.uob
.uotobmake knowledgeable
.u
.uob
.uob
w
w
w
w
w
ww
ww
ww
ww
ww
Materiality Concept - a business must perform strictly proper accounting only for items and
transactions that are significant to the business financial statements.

w
ww

om

h.co
b
b

.uo

om

h.c
b-b

h.c
b-b

bh.c
ob-

om

om

h.c
b-b

o favorable figures in the

Conservatism -wa.business
should report the
uo
.uleast
.u financial statements w.uo
w
ww
ww
w

Lower of Cost or Market - requires that an asset be reported in the financial statements at
its historical cost or its current
m whichever is lower -m
m market value.
m

h.co
b
b

.uo

w
ww

h.c
b-b

.uo

w
ww
m

w
ww

.uo

h.co
b
b

w.u
ww

.com
h
b
b-

w
ww

.uo

h.co
b
b

Page 2

h.co
b
b

o
w.u
w
w

om

w.u
ww

h.c
b-b

om

h.c
b-b

.uo

w
ww

om

w.u
ww

h.c
b-b

w
ww

.uo

.com
h
b
b-

-b

ob
w.u

ww

ww

ob
w.u

om

w
ww

h.c
b-b

.uo

-b

-b

ob
w.u

.uob
ww

ww
om

h.c
b-b

o
w.u
w
w

-b

ob
w.u
w
w

w
m

h.co
b
.uob

Accounting,
4E
ww
w
Chapter 9 Notes

.com
.com
h
h
b
b
.uob Est imating Inventory:
.uob
w
w
ww
ww

-b

.com
h
b
b-

o
w.u
w
w

om

om

h.c
b-b

w.u
ww

.c
-bh
b
o
.u

ww

.com
h
b
ob-

w.u
ww

om

h.c
b-b

o
w.u
w
w

Gross Margin (Gross Profit) Method:

Beginning Inventory h.com
.com
.com $xxxxx
.com
h
h
h
b
b
b
b
Purchases .uob
xxxx .uob
.uob
.uob
w
w
w
w
w Available for Sale ww
Cost ofwGoods
$xxxxx
ww
ww
Cost of Goods Sold
$xxxxx m
m Sales
m
o
o
c
c
.
.
.co
.com
Less
Est.
gross
margin
of
___%
(xxxxx)
h
h
h
h
b
b
b
b
buob Sold
Est. Cost of
( xxxxx) w.uo
.uob
.Goods
.uob
w
w
w
wwof Ending Inventory ww
ww
ww
Est. Cost
$xxxxx

om

.c
-bh
b
o
.u

.uo

w
ww

w
ww
om

ww

h.co
b
b

.c
-bh
b
o
w.u

ww

.com
h
b
obw.u

h.co
b
.uob
ww

om

h.c
b-b

.uo

w
ww

.uo

w
ww

w
ww

.uo

.uo

w
ww

.uo

w
ww

.uo

om

.uo

w
ww

w.u
ww

.com
h
b
b-

w
ww

.uo

.com
h
b
b-

Page 3

w.u
ww

h.c
b-b

.uo

w
ww

om

w.u
ww

h.c
b-b

h.c
b-b

.uo

om

.c
-bh
b
o
.u

w
ww

om

h.c
b-b

.c
-bh
b
o
.u

ww

bh.c
ob-

.uo

w
ww

om

o
w.u
w
w

h.c
b-b

om

om

om

om

h.c
b-b

.uo

w.u
ww

w
ww
m

h.co
b
b

o
w.u
w
w

om

h.c
b-b

om

w
ww

.uo

w
ww

om

h.c
b-b

h.c
b-b

.com
h
b
b-

om

.uo

w
ww

w
ww

h.c
b-b

h.co
b
b

h.c
b-b

om

.uo

w.u
ww

om

h.c
b-b

.uo

h.c
b-b

w
ww

.com
h
b
b-

.uo

w
ww

h.c
b-b

.uo

w
ww

om

om

w
ww

.com
h
b
b-

h.co
b
b

w.u
ww

om

.c
-bh
b
o
.u

w
ww

om

h.c
b-b

h.co
b
b

om

h.c
b-b

.uo

w
ww

om

w.u
ww

h.c
b-b

w
ww

.uo

.com
h
b
b-