BUS 101 Lecture Notes - Financial Statement, Internal Revenue Service, Inventory Turnover
Document Summary
Chapter 6 inventories and cost of sales notes. Analyse the effects of inventory methods for both financial and tax reporting. On the revenue statement, the cost of products sold approximates its current expenses. When using lifo for tax reporting, the internal revenue service (irs) mandates that it also be utilized for financial reporting: the. Compute the lower of cost or market amount of inventory. When the market value is less than the cost, inventory must be reported at market value. Current replacement cost is defined as (not sales price). It can be used in three ways: (1) to each individual item separately (2) to main asset types (3) to the whole inventory. Assess inventory management using both inventory turnover and days" sales in inventory. The number of times a company"s inventory is turned over during a certain period. Indicator of how successfully management controls the amount of accessible inventory. Inventory turnover = cost of goods sold / average inventory.
