ACCT 200 Lecture 16: ACT-200,University of Arizona, Lecture Notes(p16)
30 Aug 2018
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Cost flow assumption does not need to be consistent with the physical movement of goods: they can choose any methods: does not have to follow any specific of these for operational business. Specific identification specifically identify each inventory item, need to know exactly which two tv"s you sold out of three tv"s, need to track each individual item (makes sense with high dollar items) First-in, first-out (fifo) first items bought are the first items sold (grocery store, milk) to not lose out on money, operationally follow fifo: sell oldest things first (most used by companies) Last-in, first-out (lifo) last things purchase are first things out sell newest goods first (rare to do this): pile of tires just grab the two on top 9not consistent with physical flow of goods) Average-cost use average value of bulk costs to sell inventory. These are summations you can apply them regardless of what your company is.
