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Lecture 2

COMMERCE 1AA3 Lecture 2: Chapter 5 - Lecture 2


Department
Commerce
Course Code
COMMERCE 1AA3
Professor
Emad Mohammad
Lecture
2

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Wednesday, October 25, 2017
Chapter 5 Lecture 2
Accounting!
Calculating Ending Inventory:
Equation: Ending Inventory = beginning inventory + purchases - purchase returns and
allowance - purchase discount + freight in COGS !
Calculating COGS (Cost of Goods Sold):
Equation: COGS = beginning inventory + purchases - purchases returns and allowance
- purchase discount + freight in - ending inventory !
Costs of Goods Purchased:
Costs of goods purchased = purchases - purchase returns and allowance - purchase
discount + freight in !
Cost of Goods Available for Sale:
Cost of goods available for sale = cost of goods purchased + beginning inventory!
The Adjusting Entry:
-It’s used to update the inventory account balance, and to record the COGS:!
1. We close beginning inventory (credit) and open ending inventory (debit) !
2. Debit cost of goods sold!
3. Close purchases (credit), purchase returns and allowance (debit), purchases
discounts (debit), and freight in (credit) !
Ex. "Cost of goods sold "" " " XX !
"Inventory (ending balance) " " XX!
"Purchase returns and allowances" "XX!
"Purchase discounts " " " XX!
""Inventory (beginning balance) " " XX!
""Purchases """""XX!
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