AFM291 Chapter Notes - Chapter 8: Accounts Payable, Net Income, Consignor
9 Nov 2013
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Low inventory levels have lower carrying costs but may lead to stockouts, lost sales, and unhappy customers. Inefficient purchasing procedures, faulty manufacturing techniques, or inadequate sales efforts may lead to excessive and unusable inventories reduces profits. Inventories must be monitored to minimize carrying costs, and meet customer demand. Physical goods included in inventory. Curtailing and controlling the receipt and shipment of goods around time of count. Marking freight and shipping documents as before or after inventory count. Sales with buyback agreements: product financing arrangement involves a transfer of the inventory with either a real or implied. Loss on purchase contract - - - - - dr. Liability for onerous contracts - - - - - cr: when goods are delivered. Liability for onerous contracts - - - - - dr. Summary of when to recognize inventory based on risks and rewards. Goods in transit (fob shipping point) No(it is essentially a financing transaction) Sales with high rates of return(estimable returns)
