ACCTG 1 Lecture Notes - Lecture 10: Foreign Object Damage, Operating Expense, Perpetual Inventory
Document Summary
Flow of costs for a merchandising company: One of two systems is used to account for inventory and cost of goods sold: Beginning inventory = purchases = cost of goods available for sale. Once sold, these costs are assigned to cost of goods sold. Detailed records are kept for the cost of each product purchased and sold. These record are updated continuously (perpetually) for purchases and sales. A physical count is done at least once a year to adjust perpetual records to actual. This system enables the effective control of inventory which is an important asset. Detailed records of merchandise are not kept throughout the period. Cost of goods sold is only determined at the end of the accounting period. Cost of goods sold = beginning inventory + cost of purchases less ending. Purchases are recorded in the inventory account. Includes all costs to get merchandise to place of business and ready for resale.
