Flow of Costs - Flow of Costs The flow of costs for a...

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

View Full Document Right Arrow Icon
Flow of Costs The flow of costs for a merchandising company is as follows: Beginning inventory is added to the cost of goods purchased to arrive at cost of goods available for sale . Cost of goods available for sale is assigned to the cost of goods sold (goods sold this period) and ending inventory (goods to be sold in the future). Illustration 5-3 describes these relationships. Companies use one of two systems to account for inventory: a perpetual inventory system or a periodic inventory system . Illustration 5-3 Flow of costs Perpetual System Helpful Hint For control purposes companies take a physical inventory count under the perpetual system, even though it is not needed to determine cost of goods sold. In a perpetual inventory system , companies maintain detailed records of the cost of each inventory purchase and sale. These records continuously—perpetually—show the inventory that should be on hand for every item. For example, a Ford dealership has separate inventory records
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

Flow of Costs - Flow of Costs The flow of costs for a...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online