Income Statement Presentation

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University of Toronto Scarborough
Financial Accounting
Liang Chen

Income Statement Presentation There is a new cost of goods sold section between sales revenue and operating expenses Completing the Accounting Cycle Closing entries are the same as the perpetual system. Merchandise Inventory is affected by this process Since the amount in the adjusted trial balance is the beginning inventory, by debiting the beginning inventory and crediting the ending inventory to Capital, the Merchandise Inventory would have the new beginning inventory for the following accounting period Inventory Costing Under a Periodic Inventory System In accordance with cost principle and matching principle, the cost of items must be allocated in a consistent and rational way Using Actual physical flow costing specific identification Each item of inventory is marked, tagged, or coded with its specific unit cost. Therefore, as inventory is purchased and sold, the cost of a specific unit is known Using assumed flow methods FIFO, Average Cost, and LIFO FIFO (First in first out), Average cost, and LIFO
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