Merchandising company
one classification : Inventory
Manufacturing company
there classifications :
Raw materials
work in process
finished goods
perpetual system 永续盘存法
- Check accuracy of inventory records
2. determine amount of inventory lost due to wasted raw materials,shoplifiting, or employee theft
periodic system 实地盘存法
- determine the inventory on hand
2. determine the cost of goods sold for the period
take inventory when
- the business is closed or business is slow
2. at the end of the accounting period
(consignment goods) to hold the goods of other parties and try to sell the goods for them for a fee, but without taking ownership of the goods
to keep their inventories costs down and to avoid the risk of purchasing an item that they will not be able to sell
FIFO
costs of the earliest goods purchased are the first to be recognized in determining cost of goods sold
financial statement and tax effects of cost flow method
- income statement effects
- statement of financial position effects
- tax effects
advantage of fifo
in a period of inflation, the costs allocated to ending inventory will approximate their current cost
advantage of average costs of methode
in a period of inflation, the costs allocated to ending inventory may be understated in terms of current cost
tax effects
both inventory and net income are higher when companies use fifo in a period of inflation
average cost results in the lower income taxes because of lower net income
net realizable value
amount that a company expects to realize
