ACCTG 1 Lecture Notes - Lecture 24: Perpetual Inventory, Internal Control, Income Statement
Document Summary
Involves counting, weighing, or measuring each kind of inventory on hand. Inventory counts are part of internal control. Internal control systems include control activities; an example of which is review and reconciliation. Counting inventory is a good example of a control activity. Allows reconciliation to information in company"s inventory system. Once inventory quantities are counted, multiply by unit costs to determine total cost of inventory. Units of the same inventory can be purchased at different prices. Can only be used where: actual costs of each item can be determined, goods are easily distinguishable (not easily interchangeable, or for goods produced and segregated for specific projects. Flow of costs may not be the same as the actual flow of goods. Fifo (first-in, first-out: cost of first item purchased is cost of first item sold. Average cost: cost is determined using a moving (weighted) average of the cost of the items purchased.
