MGAB01H3 Chapter : Income Statement Presentation

• School: UTSC
• Department: Financial Accounting
• Course: MGAB01H3
• Professor: Liang Chen

Document Summary

There is a new cost of goods sold section between sales revenue and operating expenses. Closing entries are the same as the perpetual system. 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. 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 (last in first out) Fifo this means the assumption that inventory that came in first will be sold first.