MGT 11A Chapter Notes - Chapter 5: Financial Statement, Income Statement, European Cooperation In Science And Technology
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Goods damaged or obsolete (out-of-date) or deteriorated. If goods can be sold at a lower price, they are included in inventory at net realizable value. Net realizable value: sales price - cost of making the sale. Loss is recorded when the damage or obsolescence (outdated) occurs. Expense recognition principle says that inventory costs are expensed as cost of goods sold in the period when inventory is sold. Companies take a physical count of inventory at least once each year. Due to events such as theft, loss, damage, and errors. Used to adjust the inventory account balance to the actual inventory available. Physical flow of goods and cost flow do not have to be the same. 1) specific identifications: each item in inventory matched with a specific purchase and invoice. 4) weighted average (wa or average cost): requires we use the average cost per unit of inventory. Rising costs: when purchase costs regularly rise,
