Ch 8 Flashcards
(56 cards)
Merchandise concern
Retailer purchases merchandise in form ready for sale
Ex Walmart
Inventories
Assets company holds for sale
Or goods consumed in production of goods to be sold
Merchandise inventory
Unsold units left in a retail store
Only inventory account that appears in financial statements
Manufacturing concerns
Produce goods to sell to merchandising firms
Have 3 inventory accounts: raw materials, work in process,
Finished good
Raw materials inventory
Cost assigned to goods and materials on hand but
Not yet placed in production
Materials can be traced directly to end product
Work in process inventory
Partially processed units
Costs included in WIP are: cost of raw materials,
direct labor cost and manufacturing overhead
Finished goods inventory
Costs of completed and unsold units on hand
Supplies inventory
Includes materials in production but aren’t primary materials
Being processed
Perpetual inventory system
Continuously tracks changes in inventory acct.
Company records all purchases and sales directly
In inventory account as they occur
4 accounting features of perpetual inventory system?
1 purchases of merchandise for resale or raw materials
For production are dr. to inventory
2 freight in dr. to inventory
Purchase returns and allowances, purchase discounts cr.
To inventory
3 Cogs recorded at time of sale dr. COGS + cr. inventory
4 subsidiary ledger records quantity + cost of each
Inventory on hand
Periodic inventory system
Company determines quantity of inventory on hand
periodically
Records all acquisitions of inventory during accounting
Period by dr. Purchase acct.
Modified perpetual inventory system
Provides detailed inventory records of increases and
Decreases in quantities only (not $ amts)
Helps determine inventory level at any point in time
All companies need periodic verification of inventory which records by…
Actual, count, weight, measurement and compares
Results to detailed inventory records
Cost of goods available for sale or use, equation?
Cost of goods available for sail or use =
Cost of goods on hand beginning of period
+ Cost of goods acquired or produced during period
Cost of goods sold, equation?
Cost of goods sold =
Cost of goods available for sale
- cost of goods on hand at end of period
3 requirements for valuing inventory?
1 physical goods to include in inventory
2 costs to include in inventory
3 cost flow assumption to adopt
Physical goods to include in inventory, examples?
Who owns the goods?
Goods in transit
Consigned goods
Special sales agreements
Costs. To include in inventory
Product vs period costs
Cost flow assumption to adopt
Specific identification, average cost, FIFO, LIFO, retail etc.
FOB shipping point
Title passes to customer when supplier delivers goods
To the common carrier
FOB Destination
Title passes to customer only when receiving goods
From common carrier
Consignment shipment, consigned good? Consignee, Consignor ?
Consignor ships product (consigned good) to consignee
Consignee acts as agent in selling consigned goods
Consignee sells goods w/out liability except exercise due
Care and reasonable protection from loss or damage til sale
What does a consignee do after it sells a consigned product?
Remits the revenue to the Consignor less the commission
And expenses incurred in accomplishing the sale
Goods out on consignment remain the property of the…
Consignor
