ACC 311 Class 12 PPT Ch 7 no notes

7 17 perpetual and periodic inventory systems in v e

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Unformatted text preview: and Periodic Inventory Systems In v e n t o r y S y s te m P e r io d ic S y s t e m P e r p e t u a l S y s t e m C a r r ie d o v e r C a r r ie d o v e r fr o m B e g in n in g In v e n t o r y f r o m p r io r p e r io d p r io r p e r io d A c c u m u la te d in A c c u m u la te d in Ad d : P u rch ase s th e P u rc h a s e s t h e In v e n t o r y account account M e a s u re d a t e n d P e rp e tu a l re c o rd o f p e r io d b y u p d a te d a t e v e ry L e s s : E n d in g In v e n t o r y p h y s ic a l s a le in v e n t o r y c o u n t M e a s u re d at C o m p u te d a s a r e s id u a l a m o u n t e v e r y s a le b a s e d C o s t o f G o o d s S o ld o n p e rp e tu a l a t e n d o f p e r io d re co rd Ite m 7-18 Errors in Measuring Ending Inventory Errors in Measuring Inventory Ending Inventory Beginning Inventory Overstated Understated Overstated Understated Effect on Current Period's Balance Sheet Ending Inventory Retained Earnings + + - N/A N/A - + N/A N/A + + + - + + - + + Effect on n Current Period's Income Statement Goods Available for Sale Cost of Goods Sold Gross Profit Net Income 7-19 Inventory Turnover Inventory = Turnover Cost of Goods Sold Average Inventory Average Inventory is .. .. .. Average Inventory is (Beginning Inventory + Ending Inventory) ÷ 2 (Beginning Inventory + Ending Inventory) ÷ 2 This ratio reflects how many times This ratio reflects how many times average inventory was produced and average inventory was produced and sold during the period. A higher ratio sold during the period. A higher ratio iindicates that inventory moves more ndicates that inventory moves more quickly thus reducing storage and quickly thus reducing storage and obsolescence costs. obsolescence costs. 7-20...
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This note was uploaded on 01/30/2014 for the course ACC 311 taught by Professor Charrier during the Fall '08 term at University of Texas at Austin.

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