Financial Accounting Chapter 6

Financial Accounting Chapter 6 - Specific...

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

View Full Document Right Arrow Icon
Financial Accounting Chapter 6 Periodic Inventory System: - Inventory account is adjusted at the end of the accounting period Merchandising Companies: - Purchase inventory in finished form Manufacturing Company: - Complete the goods - Reported in the balance sheet: o Finished goods o Work in progress o Raw materials Single-Step Income Statement: - Does not classify items as operating and nonoperating Inventory: - Items held for sale in the normal course of business - On balance sheet as a current asset The Two Approaches Used to Prepare an Income Statement for U.S. GAAP Purposes are: - Single-step and multi-step FIFO Method: - Assumes that units sold are the earliest units acquired - Matches the expense of the last item purchased with sales - Most closely approximates the actual physical flow of inventory Weighted Average: - Matches the average cost of each unit of inventory with sales
Background image of page 1

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

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

Unformatted text preview: Specific Identification:-Matches the expense of a particular item made with the sale of that item-Matches each unit sold during the period with its real cost LIFO Method:-Matches the expense of the first items purchased with sales-Provides better matching of current revenues with current inventory costs Calculating Operating Income:-Includes: o Utility expense o Cost of goods sold o General and administrative expenses Perpetual Inventory System:-Account is continually adjusted-Tracks units from purchase to sale FOB Shipping Point:-Means title to the goods passes when they are shipped LCM Rule:-Represents an application of the conservatism principle or concept FIFO Inventory Cost Flow Assumption:-Typically approximates the actual physical flow of inventory items of most companies...
View Full Document

Page1 / 2

Financial Accounting Chapter 6 - Specific...

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