BUS 322 Chapter 8: Chapter 8.docx

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 322
• Professor: Maureen Fizzell

Document Summary

Manufacturers inventories: raw materials, work in process, finished goods. (p. 453) Gross method: both the purchases and payable are recorded at the gross amount of the invoice, and any purchase discounts that are later taken are credited to a purchase discount account. (p. 458) Net method: records the purchase and accounts payable initially at an amount net of the cash discount. If the account payable is paid after the discount period is over, the discount that is lost is recorded in a purchase discounts lost account. (p. 458) Cost of good sold and crediting inventory: inventory is a control account that is supported by a subsidiary ledger of individual inventory records. The subsidiary records show the quantity and cost of each type of inventory on hand. Periodic system: the cost of goods sold is a residual amount that depends on first calculating the cost of the ending inventory. (p. 464)