Chapter 7 - Inventory.docx

Chapter 7 - Inventory.docx - Chapter 7 Inventory Week 9...

Info icon This preview shows pages 1–2. Sign up to view the full content.

Chapter 7 – Inventory Week 9 – November 16, 2015 Inventory What happens when we sell something? What is the journal entry? DR. Cash or A/R xxx DR. Cost of Goods Sold xxx CR Revenue xxx CR Inventory xxx Note that there is an impact on the B/S and I/S Inventory is obviously key for retailers and manufacturers. Will not find much inventory, if any, in service industries except for materials used in providing the service to customers (i.e. Rogers TV – cable boxes, cables, etc.) Goods held for resale (inventory) in the regular course of business should be distinguished from fixed assets (buildings/equipment) for users on the balance sheet Inventory is subject to the Lower of Cost and Market rule (LCM) instead of being depreciated. Fixed assets are subject to the historical cost/depreciation rules. Both are a result of the conservatism concept under ASPE/IFRS Also note that for manufacturing companies, you may see inventory further sub-divided into raw materials inventory, work in process (WIP) inventory and finished goods inventory IFRS and Inventory Generally for most industries, IFRS requires inventory to be valued at cost on the balance sheet For retailers, inventory should be accounted for at “laid-down” cost which isn’t defined but can be interpreted to include all costs incurred to purchase or make the products ready for sale (ie. import duties, taxes, delivery charges, etc). For manufacturers, cost should include all costs incurred to produce the finished inventory. This cost includes direct labour, direct materials and a reasonable allocation of overhead. Overhead costs can include such costs as utilities, rent, depreciation on machines and equipment, mgmt salaries, etc. These costs are tricky to associate with product especially if multiple products are produced. This allocation is key topic in management
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern