22107 Lecture Notes - Lecture 7: Barcode, Gross Profit
Document Summary
Inventory reported: how inventory is recorded, expensed and (cid:494)intended for resale(cid:495) differentiates inventory from other assets. Follows the cost principle (recorded at acquisition cost) Includes all costs incurred (tax, labour to assemble, discounts) Inventory becomes an expense only when it is sold (cogs: calculate cogs using different inventory costing methods. Specific identification (each item must have different bar code) Fifo/ lifo (fifo lower cogs, yields highest ending inventory) Moving average (only works for loose products- fruit/veg) = cogs: income and tax effects of inventory cost flow assumptions. Lifo is not allowed for reporting tax in australia: effect of inventory errors. Errors affect balance sheet (inventory) & income statement-cogs. Errors can effect the next period (ending inv = beginning inv: how inventory is estimated. Selling price x mark up (reduces prices to cost) Used to estimate cogs through a gross profit : lower-of-cost-or-net-realisable-value rule to inventory. Inventory must be adjusted if it(cid:495)s market value falls below its cost.
