BUS 320 Study Guide - Final Guide: Gross Profit, Equity Method, Retained Earnings

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 320
• Professor: Mahmoudian Fereshteh

Document Summary

Consider the following formats regarding cost of goods sold, gross profit, net income, and retained. Errors in beginning and ending inventory will affect the cost of goods sold, gross profit, net income, and retained earning: Any misstatement of ending inventory in two years will wash out. So, no adjustment is needed for misstated inventory after two years. Ifrs and aspe recognize three acceptable cost formulas: Ending inventory in units is the same in all three methods. Cost of goods sold and cost of ending inventory are different. The cost of purchases is the same in all three methods. Each item sold and purchased is individually identified. Required for goods that are not ordinarily interchangeable and that are produced and segregated for specific projects. Reasonable to cost inventory based on an average cost. Costs assigned closely follows the actual physical flow. Simple to apply, objective, less subjective income manipulation. Ending inventory cost on balance sheet is made up average cost.