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ACC 203- Chapter 5 Notes

by: Emely Curvelo

ACC 203- Chapter 5 Notes ACC 203

Marketplace > Pace University > Accounting > ACC 203 > ACC 203 Chapter 5 Notes
Emely Curvelo
GPA 3.76
Financial Accounting
John Paul

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Financial Accounting
John Paul
Class Notes
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This 3 page Class Notes was uploaded by Emely Curvelo on Sunday October 25, 2015. The Class Notes belongs to ACC 203 at Pace University taught by John Paul in Summer 2015. Since its upload, it has received 41 views. For similar materials see Financial Accounting in Accounting at Pace University.


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Date Created: 10/25/15
Accounting 203 Notes Chapter 5 Determining Inventory Items Includes all goods that a company owns and holds for sale regardless of where the goods are located when inventory is counted Items requiring special attention include 1 Goods in Transit 2 Goods Consignment 3 Goods Damaged or Obsolete Determining Inventory Costs Includes all expenditures necessary to bring an item to a salable condition and location Minus HM IMLS uni le Wes lmpu Invoice k Cost 39 Man i tnsumnn39 le ll Storage Internal Controjsgnd Takilga Physical Cqunt Most companies take a pintmat mm39 nl inventory at least once each year 39 Physical count does not match the merchandise inventory account Adiustment must be made Inventory Costing Undera Perpetual System Decision required 0 liiventniv Systemquot Perpetual or Periodic lusting Method Specific Identi cation FIFO LIFO or Weighted Average IllH 30 39 lll5llz4b i 0 thlgllit Average 20 39 therduo I Firstin Firstout FIFOJ a Assumes costs flow in the onler ineurrml Lastin Firstout OA L MJIIIOS costs flow in the reverse order incurred um Weighted Average oAx39smm39s costs lluw it an average ill the cosLs available A A A Weighted Average A unit is sold the average cost of each unit in the inventory is assigned to cost of goods just of goods z39mt39uhlc m m e ll tnqhted ii cvucc Him or hum on Mr lure of mu Tax Effects QL gosting Methods The Internal Revenue Service IRS identi es several acceptable methods for inventory costing for reporting taxable income 0 If LII 0 is used for tax purposes the IRS requires it to be used in nancial statements Consistency musing CostingMethods Consistent um t39pt requires a company to use the same accounting methods period after period so that nancial statements are comparable across period Lowegofgost or Market Inventory must be reported at market value when mar ket is lower than cost De ned as current I t39pldtvmi39nl um not sales price Consistent with the conservatism principle Financial Statement Effects of Inventory Errors Inventory Error Cod of Goods Sold I Net Income Understate ending inwntory Overstated Understated am 39 W W K a u L 39 D a Overstate ending inventory understated Overstated 0m 13ng a w lnvcntory Turnovc during a period Indicator at how well management is controlling the amount of inventory available i a ii xiiiruf 39VWJri quotII3939m39gtz 39mnnwr a re quotll39f39ltlt Hil i39nrur39 D i Ifr39iir2rviziii if t fffl39 39 Ifrziiarzt illl39t39flfitl l39l li rr m 391i r39t2fu39 39 Dgiysi 9195 in Inventory Reveals how much inventory is available in terms ofth number of days39 sales I Muslim ini39merm r V Jitll39 quotiail 3392 lizz crzliir x39 en39 39 l i39i w unurl 39xtHli


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