Chapter 6 notes
Chapter 6 notes ACC 212 - 04
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This 2 page Class Notes was uploaded by Jada Rathbun on Tuesday October 18, 2016. The Class Notes belongs to ACC 212 - 04 at Grand Valley State University taught by David P Centers in Fall 2016. Since its upload, it has received 6 views. For similar materials see Principles of Financial Accounting in Accounting at Grand Valley State University.
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Date Created: 10/18/16
Chapter 6 Inventory o An asset o Not supplies Supplies are used internally, inventory is sold externally o Resell the items to customers Cost of goods sold (COGS) o The cost that the goods that are sold o BI + P – EI = COGS o The correlation between inventory counted, purchased inventory and inventory sold Gross profit Net Sales -COGS = Gross Product BI + P – EI = COGS Beginning inventory + Purchases = Total available for sale -Ending Inventory = Cost of Goods Sold Periodic Inventory System o Simple to use o Uses BI + P – EI = COGS o Records of inventory to show how much has been sold o Needs to physically be counted Inventory system o Perpetual is constantly updating o Done every time inventory is bought/sold/returned o Shows the cost of sales o Uses BI + P – EI = COGS o Used more today o Have to do a physical count Service company o A company that sells services not physical goods Merchandise company o When goods are sold that has been bought by a supplier Shrinkage o Recording the cost for that inventory that has changed by theft, fraud, and error Example Journal Entry 10/1 Inventory 50,000 A/P 2/10, n/30 50,000 FOB shipping point Inventory 1,000 Cash 1,000 Returns and allowances 10/3 Accounts Payable 2,000 Inventory 2,000 Purchase from a supplier 10/10 Accounts Payable 48,000 Cash 47,040 Inventory 960 FOB shipping point o We pay for the shipping (freight) o Goods are owned by the buyer as soon as they leave the seller FOB destination o They (seller) pays for the shipping o Goods are owned by the seller until they reach the buyer The FOB shipping point and destination determine who legally owns the goods and who pays for it Contra-accounts o Sales returns and allowances o Sales discounts When a company pays back the seller and the company is within the discount period the journal entry is: Date Cash X1 Sales Discount X2 A/R X1+X2