Professional Documents
Culture Documents
Inventory
Inventory
C1
C1
GOODS IN TRANSIT
FOB Shipping Point
Public
Carrier
Seller Buyer
Ownership passes
to the buyer here.
Public
Carrier
C1
GOODS ON CONSIGNMENT
Merchandise is included in the inventory of the
consignor, the owner of the inventory.
Thanks for selling my
inventory in your
store.
Consignee
Consignor
6-5
C1
C2
Minus
Discounts Invoice Plus
Insurance
and
Allowances
Cost
C2
INTERNAL CONTROLS AND TAKING A
PHYSICAL COUNT
Most companies take a When the physical count
physical count of does not match the
inventory at least once Merchandise Inventory
each year. account, an adjustment
must be made.
The matching
principle requires
matching costs
with sales.
6-9
P1
P1
SPECIFIC IDENTIFICATION
6 - 13
P1 SPECIFIC IDENTIFICATION
Income Statement
Cost of Goods Sold Balance Sheet Inventory
6 - 14
P1
SPECIFIC IDENTIFICATION
Here are the entries to record the purchases and sales. The
numbers in red are determined by the cost flow assumption used.
P1
Oldest Cost of
Costs Goods Sold
Recent Ending
Costs Inventory
6 - 16
P1
P1
P1
P1
Recent Cost of
Costs Goods Sold
Oldest
Costs
6 - 20
P1
P1
P1
P1
WEIGHTED AVERAGE
When a unit is sold, the average
cost of each unit in inventory is
assigned to cost of goods sold.
Cost of Goods Units on hand
Available for ÷ on the date of
Sale sale
6 - 24
P1
WEIGHTED AVERAGE
6 - 25
P1
WEIGHTED AVERAGE
6 - 26
P1
WEIGHTED AVERAGE
6 - 27
P1
WEIGHTED AVERAGE
Here are the entries to record the purchases and sales entries for Trekking.
The numbers in red are determined by the cost flow assumption used.
A1
FINANCIAL STATEMENT EFFECTS
OF COSTING METHODS
Because prices change, inventory methods nearly always
assign different cost amounts.
6 - 29
P2
P2
P2
A3
INVENTORY TURNOVER
Shows how many times a company turns over its inventory
during a period. Indicator of how well management is
controlling the amount of inventory available.
Average
Inventory = (Beg. Inv. + End Inv.) ÷ 2
6 - 38
A3
GLOBAL VIEW
Items and Costs Making Up Inventory
Both U.S. GAAP and IFRS include in inventory all items that a company owns
and holds for sale and include in the cost expenditures necessary to bring
those items to a salable condition and location.
P4 APPENDIX 6B:
INVENTORY ESTIMATION METHODS
Inventory sometimes requires estimation for interim statements or
if some casualty such as fire or flood makes taking a physical
count impossible.
END