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Unformatted text preview: . INVENTORY SYSTEMS 2 main types a) periodic inventory system used by small business that sell relatively inexpensive goods. b) perpetual inventory system used by business that maintains a running record of inventory on hand. Periodic inventory system Perpetual inventory system does not keep a running record of all . Keeps a running record of all goods bought and sold goods bought and sold. Inventory counted at least once a year . inventory counted once a year used for inexpensive goods . used for all types of goods 7. ADVANTAGES OF USING PERPETUAL INVENTORY continuous determination of inventory value . continuous determination of gross profit affordable with computers, scanners and bar codes on most products . perpetual inventory accounting provides management controls managers know which item are selling fastest and the profit margin on those items. 8. INVENTORY COSTING METHODS 4 costing method; a) specific unit cost b ) weighted- average cost First-in first-out (FIFO) d) Last-in, first-out (LIFO) PERIODIC INVENTORY SYSTEM at the end of the period make a physical count and apply unit cost to determine ending inventory inventory purchases are debited to the purchases account. The inventory account carries the beginning inventory balance until adjusted at period end. Example : Jan 1 Purchase 20 [email protected] RM20 = RM 400 Jan 5 Sold 17 units May 19 Purchase 55 units @ RM30 = RM 1,650 Sold 33 units Oct 23 Purchase 25 units @ RM31 = RM775 Sold 20 units 22...
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