Accounting for Inventory C Accounting for inventory requires several decisions which include n Items to include in cost o Inventory System. Perpetual or periodic n Costing Method. fifo, liFo, Weighted average, specific d D Use of estimates Gross profit method, Retail inventory method Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity
6 Accounting for Inventory ⧫Accounting for inventory requires several decisions which include: Items to include in cost. Inventory System. →Perpetual or Periodic Costing Method. →FIFO, LIFO, Weighted Average, Specific ID Use of estimates. →Gross profit method, Retail inventory method
Items in Merchandise Inventory INventory includes all goods owned by a company and held for sale. D Items requiring special attention: Goods in transit → goods on consignment -Obsolete or damaged goods Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity 7
7 Items in Merchandise Inventory ⧫Inventory includes all goods owned by a company and held for sale. Items requiring special attention: →Goods in Transit →Goods on consignment →Obsolete or damaged goods
Costs of Merchandise Inventory V All expenditures necessary to bring an item to a saleable condition and location d This includes Invoice price less discounts Import duties → Transportation-in Storage -Insurance Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity
8 Costs of Merchandise Inventory ⧫All expenditures necessary to bring an item to a saleable condition and location. This includes: →Invoice price less discounts →Import duties →Transportation-in →Storage →Insurance
Assigning Costs to Inventory Management must decide on method of determining unit cost. This will affect both the income statement and the balance sheet 囗 Methods Specific Identification FIFO →→LIFO →→ Average cost Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity
9 ⧫ Management must decide on method of determining unit cost. ⧫ This will affect both the income statement and the balance sheet. Methods: →Specific Identification →FIFO →LIFO →Average Cost Assigning Costs to Inventory
Specific Identification This method is used when items 囗 Are unique n Can be directly identified with a specific purchase and its invoice. EXamples: Automobiles, custom furniture, art Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity
10 Specific Identification ⧫This method is used when items: Are unique. Can be directly identified with a specific purchase and its invoice. Examples: Automobiles, custom furniture, art