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Accounting for Inventory

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Presentation on theme: "Accounting for Inventory"— Presentation transcript:

1 Accounting for Inventory
Chapter 19 Accounting for Inventory

2 Most efficient quantity of inventory
Determining quantity of inventory, cost of inventory, and estimating inventory Most efficient quantity of inventory Larger than needed consequences Smaller than needed consequences Periodic inventory (physical) When do companies take inventory? Perpetual inventory (book) Inventory record, stock record, stock ledger Universal Product Code (UPC)

3 INVENTORY RECORD page 566 1 3 2 1. Write the stock number and description before the periodic inventory begins. 2. Write the actual count in the No. of Units on Hand column. 3. Write the unit price and calculate the total cost after the physical inventory is completed. LESSON 19-1

4 STOCK RECORD 1 3 2 1. Purchase information 2. Sales information
page 567 1 3 2 1. Purchase information 2. Sales information 3. New balance on hand LESSON 19-1

5 Cost of Merchandise Inventory
Determining quantity of inventory, cost of inventory, and estimating inventory Cost of Merchandise Inventory First in-first out inventory costing method (FIFO) Last in-first out inventory costing method (LIFO) Weighted-average inventory costing method

6 FIRST-IN, FIRST-OUT INVENTORY COSTING METHOD
page 569 3 4 2 5 1 1. Total units on hand 2. Units from the most recent purchase 3. Units needed to equal the total units on hand 4. Unit price times fifo units 5. Total fifo cost LESSON 19-2

7 LAST-IN, FIRST-OUT INVENTORY COSTING METHOD
page 570 3 2 5 4 6 1 1. Total units on hand 2. Beginning inventory units 5. Unit price times lifo units 3. Units from the earliest purchase 6. Total lifo cost 4. Units needed to equal total units on hand LESSON 19-2

8 WEIGHTED-AVERAGE INVENTORY COSTING METHOD
page 571 1. Total cost of inventory available 2. Weighted-average price per unit 1 3. Cost of ending inventory 2 3 LESSON 19-2

9 CALCULATING THE COST OF MERCHANDISE SOLD
page 572 Cost of Merchandise Sold = Fifo Cost of Ending Inventory – Cost of Merchandise Available for Sale $1,020.00 – $386.00 = $634.00 LESSON 19-2

10 COMPARISON OF INVENTORY METHODS
page 572 Effect on gross profit and net income? LESSON 19-2

11 Determining quantity of inventory, cost of inventory, and estimating inventory
Gross profit method

12 GROSS PROFIT METHOD OF ESTIMATING INVENTORY
page 574 (continued on next slide) LESSON 19-3

13 GROSS PROFIT METHOD OF ESTIMATING INVENTORY
page 574 (continued from previous slide) LESSON 19-3

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