Fifo assumes that the earliest goods purchased older

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FIFO assumes that the earliest goods purchased (older inventory) are the first ones to be sold. Beginning inv + Cost of goods purchased = Cost of goods available for sale Cost of goods sold + Ending inventory = Cost of goods available for sale Beginning inv + Cost of goods purchased = Cost of goods sold + Ending inv
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Average Cost The average cost formula recognizes that it is not possible to measure a specific physical flow of inv when the goods available for sale are interchangeable and cannot be distinguished from one another. Cost of goods available for sale / Units available for sale = Weighted average unit cost The weighted average unit cost is recalculated each time goods are purchased(or returned) under a perpetual inventory system. Condensed or comparative income statement Net sales – COGS = Gross profit – operating exp = IBTE – tax expenses = net income Error made when determining the cost of inventory The ending inventory at the end of one period automatically becomes the beginning inventory of the next period. An error in ending inventory of the current period will have a reverse effect on net income of the next accounting period if it is not found and corrected. Inventory Turnover = costof good sold averageinventory Days in inventory = 365 days inventory turnover First types of error Errors made when determining the cost of inventory Beginning inventory + purchases - cogs = ending inventory Valuing inventory at the lower of cost and net realizable value
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To record decline in inventory value from original cost of $70,000 to net realizable value of $69,100 So we subtract Cost – LCNRV = adjusted inventory Debit COGS Credit Inventory By the same amount (Adjusted inventory) Chapter 3 Assets = Liabilities + Shareholder’s equity Assets (Prepaid expenses + prepayments + … ) Hiring new employees will not affect the assets If a client is billed then =>debit A/R / credit Rev If the cash was received in advance of the service date => debit Cash / credit unearned revenue Made a partial payment => debit A/P / credit cash Net income = Revenue Expenses Ending retained earnings = Beginning retained earnings + net income – dividends
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T accounts Trial Balance Trial balance Month , Year List of accounts Debit Credit Total Total Income statement Company name Income statement Year ended month,year Rev Service rev ……. Exp . . . Total expenses Income before tax Rev – Exp Income tax exp ……….. Net income ………..
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Statement changes of equity. Company name Statement of changes in equity Year ended month,year Common shares Retained earnings Total equity Balance start Issued common shares Net income Dividends Balance end Statement of financial position
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Company name Month, year Assets Current assets . . . Total current asset Property plant equipment . Less: deprecation - Total property plant equipment Total assets = Total current assets + total property plant equipment Liabilities and equity Current liabilities . . Total current liabilities Non current liabilities .
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  • Fall '15
  • Revenue, Generally Accepted Accounting Principles, COGS

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