文档介绍：John Wiley & Sons, Inc.
Financial Accounting 5e
Prepared by
Kurt M. Hull, MBA CPA
California State University, Los Angeles
Weygandt, Kieso, & Kimmel
CHAPTER 6
INVENTORIES
STUDY OBJECTIVES
After studying this chapter, you should understand:
How to determine
inventory quantities
LCM for determining
inventory values
Inventory accounting &
cost flow methods
Inventory errors
and their effects
Tax effects of inventory
cost flow methods
How pute and
interpret inventory turnover
CLASSIFYING INVENTORY
INVENTORY
RAW
MATERIALS
WORK
IN
PROCESS
FINISHED
GOODS
For manufacturers, inventory has three distinct categories.
STUDY OBJECTIVE 1
DETERMINING INVENTORY QUANTITIES
At the balance sheet date, companies must determine
how many units are on hand, and value those units.
Two steps are required to achieve this:
1. Take a physical inventory count
2. Determine ownership of goods
INTERNAL CONTROLS FOR
PHYSICAL INVENTORY
1
Count done by employees with no custodial responsibilities.
2
Counters establish authenticity of each item.
3
Second count by another employee.
4
Pre-numbered inventory tags and sequence checks.
5
Supervisory review.
Proper internal control over inventory can be achieved
by the implementing the following procedures:
Seller
Buyer
Public
Carrier
Co.
FOB Shipping Point FOB Destination Point
Public
Carrier
Co.
Buyer
Seller
Ownership passes to the buyer here
Ownership passes to the buyer here
DETERMINING OWNERSHIP OF
GOODS IN TRANSIT
DETERMINING OWNERSHIP OF
CONSIGNED GOODS
A consignment agreement transfers goods from a
consignor to a consignee, who agrees to sell the goods.
Consignor
Consignee
Customer
Consignee remits proceeds (less fee) to consignor when inventory is sold. Inventory on consignment is included in the consignor’s inventory until sold.
Sale
Pool of Costs
Cost of Goods Available for Sale
Beginning inventory
$ 20,000
Cost of goods purchased
100,000
Cost of goods available for sale
$120,0