ACCT1501 Chapter Notes - Chapter 8: Perpetual Inventory, Accounts Receivable, Internal Control
12 Nov 2020
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Opic 8 - introduction to inventory and non-current. Trotman, k. & gibbins, m. , 2009 financial accounting: an integrated approach, 4th edition, melbourne: In the process of production that will lead to a sale/product. In the form of raw materials or supplies to be consumed in the production process. Inventory is measured at the lower of cost or net realisable value. Cost = purchase price + import duties + costs of conversion + inward transport. The perpetual control method shows how many items are on hand at any times. This is because when inventory is received, it is added to quantity on hand. When inventory is sold, it is deducted from quantity of hand: opening quantity + purchased quantity - sold quantity = closing quantity. At any time, a physical count should match records, if it is not an adjusting entry must be made: shortage - dr shortage expense, cr inventory, overage - dr inventory, cr overage revenue.
