MCS 1000 Lecture Notes - Lecture 5: Perpetual Inventory, Consignee, Consignor

• School: University of Guelph
• Department: Marketing and Consumer Studies
• Course: MCS 1000
• Professor: Andrew Mac Dougall

Document Summary

Taking inventory: to ensure inventory is properly counted, companies must have a good system of internal control: Internal control systems include control activities; an example of which is review and reconciliation: counting inventory is a good example of a control activity, allows reconciliation to information in company"s inventory system. Average cost: used when physical flow of inventory cannot specifically be measured, under a perpetual inventory system, a new weighted (called moving) average is calculated after each purchase, used to record cost of goods sold and ending inventory. Choice of inventory cost formula: choose a formula that: Best represent as closely as possible physical flow of goods. Reports ending inventory at recent cost, and: use the same formula for inventories of similar nature and usage. Effect of inventory error on statement of financial position- In the statement of financial position: at the lower of cost and nrv.