ww

ob w.u

-b
ww
om

ob w.u

-b
ww
om

ob w.u

-b
w
m

.uob ww

-b

ob w.u w w
om
ww w

-b

w ww

.uo

h.c b-b

o w.u w w

h.c b-b

Accounting, 4E ww w
Chapter 9 Notes

h.co b .uob

w.u ww

h.c b-b

.c -bh b o .u

om

.com .com h h b b .uob Inventory Systems: .uob w w ww ww

h.c b-b om

o w.u w w

.com .com h h b b bPerpetual - keeps aocontinuous record of inventory .u .uob on hand w w w annual physical inventory -w an ww is still required

Periodic - does not keep a continuous record of inventory on hand - physical inventory is required at least once a year

o w.u w w

.com h b b-

w.u ww

.com h b ob-

o w.u w w

h.c b-b

om

w.u ww

h.c b-b

om
w ww .uo

h.co b b

.com entries for Purchases .com .com Journal and Sales of Inventory: h h h b b b .uob .uob .uob w w w w ww ww Perpetual w System
Credit Purchases

o w.u w w Periodic System

Purchases Accounts Payable om

h.c b-b

om
w ww .uo

h.c b-b

om

w.u ww

ob-

om bh.c

Inventory Accounts Payable .com .com h h b b - record sale of merchandise: Credit Sales To .uobAccounts Receivable .uob w w ww ww Sales To record .comcost of merchandise: .com h h b b - of Goods Sold obCost .uob .u w Inventory www ww End of Period Entries

w.u Accounts ww Receivable Sales

.com h b No entry required .uob w ww
b-b

h.c b-b

w ww

.uo

h.c b-b

om

ww

.c -bh b o w.u

om

w ww

.uo

h.c b-b

om

h.co b .uob ww
h.c b-b

.com .com h h b b .uob No entries required .uob w w ww ww

.com h b bh.c b-b om

Transfer Beg. Inv. Bal. To COGS: Cost of Goods Sold m Inventory h.co Inventory Cost of Goods m Sold

o w.u w w Record End. Physical Inventory: w ww

h.c b-b o

.c -bh b o .u

om

om
w ww .uo

w ww

.uo

COGS:

w ww

.uo

o of purchases to Transfer cost w.u ww

Cost of Goods Sold Purchases om

ww

.c -bh b o .u

om

w ww

.uo

h.co b b

m
w ww .uo

h.c b-b

om
w ww
om
w ww .uo

.uo

h.c b-b

om

w.u ww

bh.c ob-

w ww
m
w ww

.uo

h.c b-b

om

w ww

.uo

.com h b b-

w ww

.uo

h.c b-b

.com h b b-

Page 1

o w.u w w

h.co b b

.uo

h.c b-b

om

w ww

.uo

h.co b b

m
w.u ww o

.com h b b-

w.u ww

h.c b-b

om
w.u ww o

h.c b-b

om
w ww .uo

.com h b b-

ww

ob w.u

-b
ww
om

ob w.u

-b
ww
om

ob w.u

-b
w
m

.uob ww

-b

ob w.u w w
om
ww w

-b

w ww

.uo

h.c b-b

o w.u w w

h.c b-b

Accounting, 4E ww w
Chapter 9 Notes

h.co b .uob

w.u ww

h.c b-b

.c -bh b o .u

om

.com .com .com h h h b b b uob of Goods Sold (Periodic .uob Determining the .Cost .uob System): w w w ww ww ww
Beginning Inventory Balance + Purchases m o f Goods Available om = Cost Sale .co .cfor .com h h h b b b - - Ending Inventory Balance .uob .uob .uob w w w = Cost o f Goods ww ww Sold ww

w.u ww

.com h b ob-

o w.u w w

h.c b-b

om

w.u ww

h.c b-b

om
w ww .uo

h.co b b

.com .com .com .com .com Inventory Costing Methods: h h h h h b b b b b .uob .uob .uob .uob .uob w w w w w w Cost - Cost method wUnit ww wwbased on the specific cost wwof particular units of ww (1) Specific
inventory (2)om Weighted Average Cost om - Cost method based on the weighted average cost of inventory .c .c during the period bh.com .com .com h h h h purchased and held b b b b bbob- purchased) are the .uob.uob (3) FIFO - Cost .uo .uo .uunits method by which the first costs into inventory (first w w w w w ww ww ww wwsold (first units sold). w first costs out t o cost of goods Ending Inventory consists w of the most recent purchases. (4) LIFO - Cost method by inventory (last units purchased) m mwhich the last costs into .co .co .com .com are the .com h h h h h b b b b b -t o cost of goods sold (first - units sold). Ending Inventory first cost out consists of .uob .uob inventory and thew .uob purchases made. w.uob .uob w w w the beginning earliest w w w w w

om Accounting Principals and .com .cConcepts: .com .com .com h h h h h b b b b b .uob .uob .uob .uob .uob w w w w w Consistencyw Principle - a business should method and proceduresw from w w ww ww use the same accounting ww
period to period.

om report enough information Disclosure Principle - a business must .com .com financial statements .c .com for .com h h h h h b b b b b bmake outsiders to knowledgeable.u decisions ob- about the business. .uob .uo .uob .uob w w w w w ww ww ww ww ww
h.co b b
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w ww

.uo

o favorable figures in the Conservatism -w a.business should report the least uo .u .u financial statements w.uo w ww ww w

h.c b-b

om

h.c b-b

om

bh.c ob-

om

h.c b-b

om

w ww

.uo

h.co b b

Lower of Cost or Market - requires that an asset be reported in the financial statements at its historical cost or its current m whichever is lower -m m market value. m

w ww
m

.uo

h.c b-b

w ww

.uo

h.co b b

Page 2

o w.u w w

h.co b b

w ww

.uo

h.c b-b

om

w ww

.uo

h.co b b

w.u ww

.com h b b-

w.u ww

h.c b-b

om
w.u ww o

h.c b-b

om
w ww .uo

.com h b b-

ww

ob w.u

-b
ww
om

ob w.u

-b
ww
om

ob w.u

-b
w
m

.uob ww

-b

ob w.u w w
om
ww w

-b

w ww

.uo

h.c b-b

o w.u w w

h.c b-b

Accounting, 4E ww w
Chapter 9 Notes

h.co b .uob

w.u ww

h.c b-b

.c -bh b o .u

om

.com .com h h b b .uob Est imating Inventory: .uob w w ww ww

o w.u w w

.com h b b-

w.u ww

.com h b ob-

o w.u w w

h.c b-b

om

Gross Margin (Gross Profit) Method: Beginning Inventory h.com .com .com $xxxxx .com h h h b b b b Purchases .uob xxxx .uob .uob .uob w w w w w Available for Sale ww Cost ofw Goods $xxxxx ww ww Cost of Goods Sold $xxxxx m m Sales m o o c c . . .co .com Less Est. gross margin of ___% (xxxxx) h h h h b b b b buob Sold Est. Cost of Goods ( xxxxx) w.uo .uob . .uob w w w wwof Ending Inventory ww ww ww Est. Cost $xxxxx

w ww

.uo

h.co b b

w ww

.uo

h.c b-b

om

w ww

.c -bh b o .u

om
w ww
om
ww
m
w ww

.uo

h.co b b

m
w.u ww o

h.c b-b

om
w.u ww o

h.c b-b

om
w ww .uo

h.c b-b

om

ww

.c -bh b o w.u

.com h b obw.u
.c -bh b o .u om

w ww

.uo

h.c b-b

om
w ww .uo

.com h b b-

w ww

.uo

h.c b-b

om

h.co b .uob ww
h.c b-b

w ww

.uo

h.c b-b

om
w.u ww o

h.c b-b

om
w ww

.c -bh b o .u

om

om
w ww
m
w ww

w ww

.uo

.uo

.com h b b-

w ww

.uo

h.c b-b

om
o w.u w w

h.c b-b

om
ww w

.c -bh b o .u

om

w ww

.uo

h.co b b

.uo

h.c b-b

om
w ww
om
w ww .uo

.uo

h.c b-b

om
w.u ww

bh.c ob-

om
w ww
m
w ww .uo

.uo

h.c b-b

om

w ww

.uo

.com h b b-

w ww

.uo

h.c b-b

.com h b b-

Page 3

o w.u w w

h.co b b

h.c b-b

om

w ww

.uo

h.co b b

m
w.u ww o

.com h b b-

w.u ww

h.c b-b

om
w.u ww o

h.c b-b

om
w ww .uo

.com h b b-