Chapter 6 merchandise inventory.docx - Chapter 6...

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Chapter 6 merchandise inventory1.Identify accounting principles and controls related to merchandise inventory.a.The accounting principles and controls that relate to merchandise inventory.i.Accounting principles help accountants classify and report items on the financialstatements.ii.The accounting principles associated with merchandise inventory are:1.Consistencya.States that a business should use the same accounting methodsand procedures from period to period.b.Consistency helps investors and creditors compare financialstatements from one period to the next.c.If changes are made in accounting methods these changes mustbe reported, generally in the notes to the financial statements.2.Disclosurea.States that financial statements should report enoughinformation for outsiders to make knowledgeable decisionsabout the company.b.Information should be relevant and have faithful representation.3.Materialitya.States that a company must perform strictly proper accountingonly for items that are significant to the business’s financialsituation.b.Information is significant when it would cause someone tochange a decision.c.For example, 10k is material to a small business with sales of100k. however 10 k isn’t material to a large company withannual sales of 1b.

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Term
Summer
Professor
Kasyoka
Tags
100K, 10 K

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