BUS 251 Chapter 7: Chapter#7.docx

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 251
• Professor: annemcdonale

Document Summary

Inventory purchases aren"t recorded directly to inventory but are accumulated in a separate purchases account: cost of sales= beginning inventory+ purchases ending inventory, the beginning and ending inventory balances are known from the inventory counts and the amount of purchases is available from the purchases account. (thus it is impossible to determine the cost of sales from the accounting system before the end of a period, no entry records cost of sales until the end of the period after the inventory has been counted. The perpetual system only accounts for the cost of inventory actually sold and only a physical count will determine inventory consumed in other ways: e. g. if of inventory had been stolen during the year and the inventory wasn"t counted5, the inventory amount on the balance sheet would be overstated by and expenses would be understated by .