MGCR 211 Lecture Notes - Perpetual Inventory, Historical Cost

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Acquisition costs the cost value that is originally assigned to inventory should contain all laid- down costs. At the end of every accounting period, most companies therefore compare the cost of the inventory with its market value and apply the lower of cost and net realizable value rule. Direct method the ending inventory is reduced to the lower ntv, which causes the cogs amount to rise in the statement of earnings. Ifrs indicates that inventory should be recognized at lower of cost or nrv. Reduces the amount of bias or estimates that are included in the inventory figure. Inventory systems two types of info needed about inventory: the number of units sold during a period, the number that remain perpetual inventory systems. Keep track of units and/or their associated costs on a continuous basis. When a unit it sold, it is immediately removed from the inventory account. Credit to the account at the time of sale periodic inventory system.

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