Chapter 10: INVENTORIES

INVENTORY IS Assets held on sale in ordinary course of business In

form of materials/supplies (Consumable)
Classes of inventories

 Trading Concerns (Buy & Sell in same FORM)

 Merchandise Inventory (Applied goods held by Trading Concern)
RULE: All goods to which the entity has title shall be included in the
inventory regardless of location.

Legal Test Inventory

Owner of the goods Entity Included
Affirmative Included
If answer is in Not
Negative Included
     
Applying Legal Test Inventory
Goods owned and On hand Included
Goods in Transit and sold FOB
DESTINATION Included
Goods in Transit and purchased FOB
SHIP POINT Included
Goods OUT of Consignment Included
Goods in the hands of Sales Agent Included
Goods held by Customers on
Approval/Trial Included
EXCEPTION: INSTALLMENT(Contract, NOT
Sales) INCLUDED

COST OF INVENTORIES
The cost shall comprise
Cost of purchase
Cost of conversion
Other cost to bring inventory