How do we recognise inventory? (3)
- Initial recognition
- Subsequent measurement
- De-recognition
What is inventory? (3)
- Inventory is an asset which a business buys to held for sale in the normal course of business
- Use in the production of assets for sale in the normal course of business
- used in the process of performing a service a service that is sold during the normal activities of the business
Classification depends on the __________ of the business.
intention
How do we measure inventory when it is first bought?
It is initially measured at cost.
What does cost include? (2)
- Cash consideration
- Credit payment :
- within normal credit terms
- Deferred payment
What does the cost of inventory include?
” For the cost of inventory we include all costs incurred to get the inventory to present condition and location where it is ready to be sold”
What do we base the recognition of inventory on? (2)
- Definition criteria
2. Recognition criteria
What is it called when a business gives a customer a “discount” for bulk purchases?
A trade discount
True or false, trade discounts are recorded in the general ledger or as journal entries
False
What appears on the purchase invoice?
The new purchase price (after trade discount has been deducted) appears on the purchase invoice
What is the cost to the business of the trade discount?
The business totals the net cost of all trade discounts
