Inventory Flashcards
Inventory
Tangible property that is held for resale or will be used in producing goods or services.
Reported on the balance sheet as a current asset.
Types of Inventory
Raw materials
Work in process
Finished goods
Amount recorded for inventory should include:
Invoice price
Freight charges
Inspection costs
Preparation costs
Shipping Costs
To get the inventory are
included as part of the cost of the
inventory.
FOB Shipping Point
Goods being shipped are included in inventory of buyer while in transit.
FOB Destination
Goods being shipped are included in inventory of seller until received by buyer.
Alternative Inventory Cost Flow Methods
FIFO
LIFO
Weighted Average
Specific Identification
FIFO
The cost of the oldest inventory items are charged to cost of goods sold when goods are sold.
The cost of the newest inventory items remain in ending inventory.
LIFO
The cost of the newest inventory items are charged to cost of goods sold when goods are sold.
The cost of the oldest inventory items remain in ending inventory.
Weighted Average
Assigns an average inventory cost to each unit available for sale so that COGS and ending inventory are based on the same costs per unit of inventory.
Specific Identification
Tracks specific items such as automobiles or diamond rings so that the cost of the specific items is recognized when it is sold.
Perpetual Inventory System
The inventory balance is known at all time under the perpetual inventory system.
Periodic Inventory System
Inventory count is taken at the end of a period.
