BU127 Chapter Notes - Chapter 8: Weighted Arithmetic Mean, Gross Profit, Gross Margin
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BU127 Full Course Notes
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Document Summary
Chapter 8: reporting and interpreting cost of sales and inventory. Roles of the accounting system in the inventory management process: Tangible property held for sale in the normal course of business or used in producing goods or services for sale. The cost principle requires that inventory be recorded at the price paid or the consideration given. Inventory cost includes the sum of all costs incurred in bringing the asset to usable or saleable condition (invoice price + freight + inspection costs + preparation costs) Purchases inventory that is in ready to sell condition. When purchased, the merchandise inventory account is increased. When the goods are sold, cost of sales is increased and merchandise inventory is decreased. Purchases raw materials for use in making inventory (the items, and their costs, are included in raw materials inventory until they are used, at which point they become part of work in process inventory.
