100%(1)1 out of 1 people found this document helpful
This preview shows page 1 - 6 out of 25 pages.
CHAPTER8 – INVENTORYINVENTORYRECORDINGSYSTEMSThe Focus Of Today’s Class Is Merchandising Companies. All Merchandisers Record The Following Basic Transactions:1.Purchases Of Inventory2.Sales Of Inventory•Revenue•Cost Of Goods Sold (COGS)However, Merchandisers Have Two Options For Recording These Transactions In Their Books. They May Use Either The:1. Perpetual Method– COGS Recorded Each Time A Sale Occurs2.PeriodicMethod– COGS Recorded PeriodicallyWhat Is The Advantage Of The Perpetual System?
1.Product Costs2.Period CostsOnly Product Costs Should Be Included In InventoryThe Most Significant Product Cost Is, Of Course, The Inventory’s…Purchase PricePage 4 of 25
However, The Following Are Also Considered Product Costs:Effect On Inventory Value1.Shipping/Freight-InIncrease2.Purchase DiscountsDecrease3.Purchase Returns And AllowancesDecreaseThere Are Two Methods For Recording Purchase Discounts:1.Gross Method•Discounts Are Not Recorded Unless They Are Taken2.Net Method •Accounts Payable Are Recorded Net Of Discounts•Discounts That Are Not Eventually Taken Are Recorded As Either Interest Expense Or Purchase Discounts Lost