Full Absorption Costing
The primary basis of accounting for inventory is acquisition cost.
Inventory should include all costs
incurred to acquire goods and
prepare them for sale.
The acquisition costs
for a retailer could include costs of ordering
, inspecting and recording the purchase
, special handling
, and shelving
Adjustments may be made directly to the inventory account or made
to supplemental accounts, provided the balance sheet amount
means that in practice many firms don’t
allocate all these costs to the inventory.
Inventory Cost Flows – Retailer
Cost of Goods Sold (RE)
SG&A Expenses (RE)
Acquisition of Merchandise and related costs
includes transportation and special handling, shelving, cash
discounts, returns and other adjustments are part of costs included in inventory