ACC-1A Lecture Notes - Lecture 16: Financial Statement, Income Statement
Document Summary
Principles of accounting 1: compute the proper valuation of inventory at other than cost, using the lower- of-cost-or-market and net realizable value concepts. Net realizable value is the estimated selling price less any costs to sell or dispose of the items: inventory shrinkage -the physical inventory count is the basis for recording the adjusting entry for inventory shrinkage. The adjusting entry to reduce merchandise inventory for decline in market value, damage or shrinkage is: cost of goods sold xxx. Errors in the physical inventory count effect a company"s financial statements. You should be able to analyze whether a particular inventory error will overstate or understate financial statement items. If the physical inventory count is understated (less inventory is shown on the balance sheet than is really in inventory for example: the count and thus, the balance sheet indicates say when there really is ).
