ACCT 2220 Chapter Notes - Chapter 6: Perpetual Inventory, Internal Control, Weighted Arithmetic Mean
Document Summary
Whether companies use a periodic or perpetual system, physical inventory must still be counted at the end of the period. This will identify inventory shrinkage due to theft, spoilage etc. Internal control: related methods and measures to help a company achieve reliable financial reporting, effective and efficient operations, and compliance with relevant laws and operations. To ensure inventory is properly counted to companies must have good internal control procedures (ex: pre-numbered tags, counting in teams by employees that do not have responsibility for the record keeping or custody of inventory. ) Goods in transit at the end of the period make determining ownership more difficult. Apply the fob concepts from chapter 5: fob shipping point, fob destination. The ownership of consigned goods remains with the owner not the holder of the goods. Goods taken home on approval by the customer are still owned by the company. Specific identification tracks actual physical flow if goods.