Last In First Out LIFO Periodic

In this presentation we will discuss the lastin first out inventory system on a periodic basis rather than a perpetual basis. As we go through this process, we want to always be comparing those to one, the LIFO or lastin first out system to other systems such as first in first out and average, as well as comparing the perpetual system to the periodic system. We’re going to go through this by looking at a problem the problem going into a worksheet such as this, I do recommend learning this worksheet. This worksheet should look repetitive if you seen the first in first out presentation as well as presentations for the perpetual system.

(more…)

First In First Out (FIFO) Periodic System

In this presentation we will discuss first in first out or FIFO using a periodic system as compared to a perpetual system. As we go through this, we want to keep that in mind all the time that been that we are using first in first out as opposed to some other systems lastin first out, for example, or average cost, and we’re doing so using a periodic system rather than a perpetual system. Best way to demonstrate is with examples. So we’ll go through an example problem. We’re going to be using this worksheet for our example problem. It looks like an extended worksheet or large worksheet, but it really is the best worksheet to go through in order to figure out all the components of problems that deal with these cost flow assumptions, including a first in first out lastin first out, or an average method, and using a periodic or perpetual for any of them.

(more…)

Perpetual & Periodic Inventory Systems

In this presentation, we will compare and contrast the perpetual and periodic inventory systems as we track inventory through the accounting process. First, we’re going to look at the perpetual system, the system we typically think of when recording transactions that deal with inventory. So if a transaction doesn’t say it’s using a periodic or perpetual system, you probably want to default to the perpetual system. We have here the owner, we have the customer, we’re saying that we’re selling this inventory this Inc for a cost of 8450. To the customer, the customer is not paying cash but pain, an IOU to the owner. Typically, under a perpetual system. We break this out into two components one, the IOU, or the accounts receivable or sales component. The component similar to what would be seen if we were not selling merchandise but a service company.

(more…)

Lower of Cost or Market

In this presentation we will discuss the concept of lower of cost or market. We will define this concept first and then see it and talk about how it would apply to inventory. The definition of lower of cost or market according to fundamental accounting principles, while 22nd edition is required method to report inventory at market replacement cost when that market cost is lower than recorded cost. So, what we’re saying here is we have we’re talking about the inventory, of course, and we’re saying that we have to record it at the replacement cost. When that replacement cost that market cost is lower than the recorded cost, what we actually purchased it for. So this looks like a confusing type of definition. However, it’s pretty straightforward. What we’re applying here is going to be the conservative principle meaning that if our inventory has declined in value, we have to record it at the lower cost. We don’t want to be overstating our income mentoree obviously regulations are very concerned about us overstating something, when we’re talking about an asset, and making the financial statements look better than they would rather than understating it.

(more…)

Consistency Concept

In this presentation we will discuss the consistency principle as it relates to inventory and inventory assumptions. First, we’re going to define the consistency principle and then apply it to an assumption such as the flow assumption such as do we use something like a first out last In First Out average inventory system, the definition of consistency principle according to fundamental accounting principles, while 22nd edition is a principle that prescribes use of the same accounting method methods over time so that financial statements are comparable across periods. So, here we’re considering the assumptions that we’re making with the flow of inventory those being either first in first out last in first out or the average method typically for the cost flow assumptions, because those are assumptions.

(more…)

Inventory Costs

In this presentation we will discuss what will be included or should be included in inventory costs. So when considering inventory cost, clearly we have the cost of the inventory which would be included. But there are other components that we want to keep aware of. And keep in mind that could be included in the cost of inventory as we record that inventory cost that purchase price or the amount in dollars of inventory on the financial statements. One is going to be Do we have to pay for the shipping costs and that typically will have to do with the terms of fo B shipping point, or fob destination is going to be a common question that is asked and a common factor in practice that we need to consider.

(more…)

Inventory Methods Explained and compared FIFO LIFO 15 600

Hello in this lecture we’re going to talk about estimating inventory methods methods such as first in first out last in first out and the average method. Last time we talked about specific identification when we were selling the inventory of forklifts. We use specific identification meaning we had an ID number for each particular forklift and knew exactly which forklift we sold and the cost of that particular forklift. reason that makes sense for forklifts is because they’re relatively large, they could be distinct in nature, and they have a fairly large dollar amount in comparison to other types of inventory. If we’re selling something else, like coffee mugs over here, we may have a large amount of coffee mug they may be all completely the same.

(more…)

Inventory Tracking Explained – Introduction-Specific 10 600

Hello. In this lecture we’re going to talk about the idea of tracking inventory and recording inventory, both in terms of the balance sheet as well as the income statement in the format of cost of goods sold. In our example, we’re going to be purchasing and selling forklifts, meaning we’re going to purchase forklifts from the factory and then we’re going to sell those forklifts. That means that forklifts to us will be inventory their inventory because we are purchasing the forklifts in order to resell them for the generation of revenue. That’s really going to be the definition of inventory the purchasing of something for the resale of it as opposed to if we were someone else purchasing the forklift in order to help us generate revenue in another way through the use of the forklift, in which case it would then be property plant and equipment.

(more…)

Cash Receipts Journal 40

In this presentation we will talk about the cash receipts journal. The cash receipts journal will be used when we have cash receipts when using a more of a manual system or a data input system that we will be doing by hand as opposed to an automated system. It’s still useful to know the cash receipts journal if using an automated system for a few different reasons. One is that we might want to generate reports from an automated system, similar to what we would be creating in a manual system for a cash receipts journal. And to it’s just a good idea to have different types of systems in mind, so we can see what’s the same and what is different between different accounting systems. The cash receipts journal will be used for every time we have a cash receipts. So the thing that transaction triggering a cash receipt will be when cash is being used. And we’re going to have a little bit more complex complexity in a cash receipts journal than something like a sales journal because we may be receiving cash for multiple different things.

(more…)