Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
10 Cards in this Set
- Front
- Back
|
Perpetual v. Periodic Inventory |
Perpetual is continually being updated. Periodic only updated on schedule. Both have to be physically checked and may be off from the records due to theft or mistakes. |
|
|
What is inventory? |
Goods: -held for sale in ordinary course of business (FG), -in process of production for such sale (WIP), -to be currently consumed in the production of goods (RM). |
|
|
How do you deal with normal and excessive spoilage? |
Normal-product cost Excessive-period cost |
|
|
Who owns goods at FOB-shipping point, FOB-destination, consignment, sales with buybacks, sales with high R/A, and sales on installments? |
FOB- shipping point: buyer FOB-destination: seller consignment: seller sales with buybacks: seller sales w/ high R/A: buyer if you can estimate sales on installments: buyer if you can estimate collection |
|
|
What are the cost flow assumptions? |
FIFO,LIFO, average cost, and specific id. The method does not have to match the physical flow of goods Often follows revenue flow. |
|
|
What are the effects of inventory errors? |
Inventory error - Ending inventory EI up COGS down NI up EI down COGS up NI down Inventory error - Beginning Inventory EI up COGS up NI down EI down COGS down NI up |
|
|
When is FIFO best? LIFO? Average cost? |
FIFO-best if spoilage is expected, current revenue matched with oldest cost. LIFO-best with wildly fluctuating costs, has a stabilizing effect on price changes, Matches current cost with current revenue. AC - Best when no fluctuations are expected. |
|
|
What is the money value method? |
It uses money rather than units to measure. Companies are more likely to use this LIFO method unless they only deal with few goods and expect little change in product mix. Less record keeping. |
|
|
Describe the periodic method. |
Purchases of merchandise are debited to purchases. EI is determined by physical count. + Purchases = GAS (Goods available for sale) - End Inv = COGS |
|
|
Describe the perpetual system. |
-Purchases are debited to Inventory -Freight-in is debited to inventory -Purchase R/A and discounts are credited to inventory. -COGS is debited and inventory is credited for each sale. -Subsidiary records show quantity and cost of each type of inventory on hand. |
