COMMERCE 1AA3 Lecture 10: Accounting Inventory
21 Mar 2016
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Cogas = costs of goods available for sale. Inventory costing methods: specific id cost, average cost, first-in, first-out. Physical flow the physical aspect of picking an item. Cost flow assumption: no matter which one someone picks physically, we assume that they picked the first one placed inside: selling price, c. o. g. s, gross profit. 2 (because the 1 dollar item was in first) Weight average = 1+1. 50+1. 75+2+2. 25 /5 =1. 7: weighted average formula= cogas/number of goods. Under fifo: selling price = 3, c. o. g. s= (1, gross profit = 2. Under weighted average cost (wac: selling price = 3, c. o. g. s, gross profit = 1. 3. If product is homogenous= use fifo or weighted cost. If profit is non homogenous= use specific id cost. Items that wont change: # of units available for sale, # units sold, cost of goods available for sale, # of units in ending inventory. With perpetual inventory, it is much better, date-wise. Principles related to inventories: comparability, disclosure.
