ACC 113 Lecture Notes - Lecture 8: Accrual, Tunxis Community College, Basis Of Accounting
6 Jan 2021
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You adjust your inventory value for the fair market value of inventory you possess, this happens every time financial statements are prepared (annually, quarterly etc. ). Fmv is less than the inventory, you must never overstate your inventory: must report value of inventory at the lower of cost and market (lcm rule, market value definition: # 1 user and why? (facts of the case) Industry (inflationary or deflationary), type of entity, size, ownership, key success factors. Recommend one alternative based on #1 user and/or facts or the case. Period cost (indirect expense) or product cost (direct inventory) Note: accrual accounting is a method that records revenue and expenses when they are incurred, regardless of when cash is exchanged. When attempting to assess and predict future cash flows the creditors/analysts want to see earning measures that are supported by cash flows. For this reason, they use cfo to calculate cf per share.
