RSM220H1 Chapter Notes -Perpetual Inventory, Debits And Credits, Income Statement
20 Apr 2012
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Document Summary
Taking a physical inventory involves actually counting, weighing, or measuring each kind of inventory on hand. Companies often count their inventory when the business is at its slowest time of year. Counting should be done by employees who do not have custodial or record-keeping responsibilities for the inventory. Authenticity of each inventory item should be established. The count should be done by 2 people. A supervisor should check that all inventory items have been tagged once and only once. Unit costs are then applied to the quantities to determine the total cost of the inventory. In general, goods should be included in the inventory of the owner, who has legal title to them. Goods in transit should be included in the inventory count of the company with title to them. Goods shipped fob shipping point belong to the buyer. Goods shipped fob destination belong to the seller. Goods on consignment belong to the shipper (consignor): periodic inventory system.
