06 - Presentation Deck - ACC 211: PRINCIPLES OF ACCOUNTING...

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Unformatted text preview: ACC 211: PRINCIPLES OF ACCOUNTING CHAPTER 6: INVENTORIES PRESENTATION DECK Prepared by: Jill Mitchell, Assistant Professor, NOVA Reference: Weygandt, Jerry, Kieso, and Kimmel. Accounting Principles . 9th edition. USA: John Wiley & Sons, Inc., 2009. Unless noted, illustrations are from the referenced text. Chapter 6-2 1.1 Be able to distinguish between the three categories of inventory for manufacturing organizations. Chapter 6: Inventories Course Competencies 2. Determining Inventory Quantities 1. Classifying Inventory 3. Inventory Costing 2.1 Be able to determine ownership of goods based upon freight terms and consignment.** 3.1 Be able to apply the actual assumed inventory cost flow methods assuming a periodic inventory system in assigning costs to ending inventory and cost of goods sold. 3.2 Understand the purpose and application of LCM. ** Chapter 6-3 Regardless of the classification, companies report all inventories under Current Assets on the balance sheet. Classifying Inventory Merchandising Company Manufacturing Company One classification: Three classifications: Merchandise Inventory 1. Raw Materials basic goods that will be used in production that have not yet been placed into production 2. Work in Process that portion of manufactured inventory that has been placed into the production process but is not yet complete 3. Finished Goods manufactured items that are completed and ready for sale Just-in-time (JIT) inventory 1 : An inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs. 1 Source: http://www.investopedia.com/terms/j/jit.asp 1.1 Be able to distinguish between the three categories of inventory for manufacturing organizations. Chapter 6-4 Physical inventory is taken for two reasons : Perpetual System 1. Check accuracy of inventory records 2. Determine amount of inventory lost shrinkage (e.g. wasted raw materials, shoplifting, or employee theft) Periodic System 1. Determine the inventory on hand 2. Determine the cost of goods sold for the period Determining Inventory Quantities Involves counting, weighing, or measuring each kind of inventory on hand. A physical inventory is taken: 1. when the business is closed or when business is slow 2. at end of the accounting period. Taking a Physical Inventory 2.1 Be able to determine ownership of goods based upon freight terms and consignment.** Chapter 6-5 Goods in Transit (e.g on board a truck, train, ship or plane) Purchased goods not yet received. Sold goods not yet delivered. In order to arrive an accurate count, the company MUST determine ownership of these goods....
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This note was uploaded on 02/28/2011 for the course ACC 211 taught by Professor Mitchell during the Spring '11 term at Northern Virginia Community College.

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06 - Presentation Deck - ACC 211: PRINCIPLES OF ACCOUNTING...

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