ACCT 110 Lecture Notes - Lecture 13: Santa Barbara City College, Subledger, Perpetual Inventory
Document Summary
Abnormal spoilage or wastage of materials, labour and other production costs. Interest costs when inventories are purchased on delayed payment terms. Period costs selling expenses, general and administrative expenses. Level of inventory affects: current assets, net income, retained earnings, and ratios used to evaluate management"s performance. Companies need inventory systems that give accurate, up-todate information: to monitor waste, breakage, theft, improper data entries, failure to record requisitions, to avoid stock-outs and over-purchasing, and prepare accounting data. Two systems in use for maintaining accurate inventory records: the perpetual system continuously tracks changes in the inventory account, the periodic system updates inventory records in the ledger only periodically. Provides a continuous record of the balances in both the inventory account and the cost of goods account. Purchases of inventory and cost of inventory sold are recorded directly in the inventory account as they occur. Cost of freight, purchase returns and allowances, and purchase discounts are all recorded in the inventory account.
