MGMT 20000 Chapter Notes - Chapter 6: Income Statement

• School: Purdue University
• Department: Management
• Course: MGMT 20000
• Professor: Frank Kane

Document Summary

Perpetual inventory system-inventory system that maintains a continual record of inventory purchased and sold. Periodic inventory system-inventory system that periodically adjusts for purchases and sales of inventory at the end of the reporting period based on a physical count of inventory on hand. Perpetual inventory system is most often used in practice. In practice, most companies maintain their own inventory records throughout the year using the fifo assumption, because that"s how they typically sell their actual inventory. Fob shipping point means title passes when seller ships the inventory. Fob destination means title passes when the inventory reaches buyer"s destination. Freight0in-cost to transport inventory to the company, which is included as part of inventory cost. We add the cost of freight-in to the balance of inventory. When the inventory is sold, those freight charges become part of the cost of goods sold.