Chapter 6 Inventory and cost of goods sold PDF

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Summary

These notes are from lectures in financial accounting, chapter 6...

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Inventory: ● What you sell ● Includes goods that aren’t yet finished ● Reported as current asset ● Raw materials also inventory Cost of goods sold (expense accounts) ● Cost of inventory sold Merchandise company ● wholesale ● Retailer Manufacturing company ● Raw materials ● Work in progress ● Finished goods

Specific identification: matches each unit of inventory with its actual cost First-in, first-out (FIFO): assumes first units purchased are first ones sold Last-in, first-out (LIFO): assumes last units purchased are first ones sold Weighted-average cost: assumes units sold comes from random mixture COGS- Cost of Goods Sold EI- Ending inventory

BOTH ARE DOLLAR VALUES

Beginning inventory + purchases = Cost of Goods Available for Sale (COGAS) COGAS - ending inventory = Cost of Goods Sold (COGS) Weighted average cost per unit = (COGAS / Total units) Perpetual Inventory System ● Maintains a continual record of inventory ● Helps a company better manage inventory levels Periodic Inventory System ● Does not maintain a continual record of inventory ● Periodically adjusts for purchase and sale of inventory Freight-in: shipments from suppliers Freight-out: shipment to customers...