Chapter 1 - Inventory Flashcards
What is periodic inventory system?
No continuos record of the inventory items are kept
This is what we do at Omni
What is the two types of inventory system?
Periodic
Perpetual inventory system
What is perpetual inventory system?
Under perpetual system when items are purchased, purchase account is debited and cash is credited. When items are sold, 1) the sales account is credited and cash is debited 2) cogs is debited and inventory is credited
What is formula for cost of goods sold?
Beg inventory + purchases = cog avail for sale
cog avail for sale - ending inventory = cog consumed
og consumed - cog used internally = cogs
What are the two steps to take physical inventory?
Work in pairs
Footing the inventory (extension)
What is consigned goods? Should it be included in inventory?
Items that you are selling for other people. No- it’s not your inventory
What is FOB destination and FOB shipping point?
FOB destination means the seller will deliver the product free of any freight charges to the destination specified by the buyer. Title does not pass to the purchaser until the goods reach the purchaser. Should be included seller’s inventory
FOB Shipping - buyer must pay transportation charges to have it shipped to a specified location. Should be included in buyer’s inventory
What is the four inventory valuation methods?
FIFO
LIFO
Weighted average
Specific identification (like car dealership)
What is retail method?
Primarily used by department stores
Do not take physical count
Begging inventory + purchases = cog available
Do this for the cost and retail selling price to get cost percentage
Cost percentage x ending retail price = ending inventory
What is gross profit method?
Use historical gross profit ratio % to compute ending inventory
Beg inventory + purchases - estimated cogs (sales x 1 - profit ratio) = ending inventory
