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Ebook Financial accounting (3rd edition): Part 2

(BQ) Part 2 book "Financial accounting" has contents: Inventories; financial assets, liabilities and equity; accounting and taxation, cash flow statements, group accounting, foreign currency translation, accounting for price changes, financial appraisal, international analysis. | FINA_C10.qxd 4/13/07 2:26 PM Page 195 www.downloadslide.com Chapter 10 Inventories Contents Objectives 10.1 10.2 Introduction Counting inventory 10.2.1 Periodic counts 10.2.2 Perpetual inventory 10.3 Valuation of inventory at historical cost 10.4 Inventory flow 10.4.1 Unit cost 10.4.2 First in, first out (FIFO) 10.4.3 Last in, first out (LIFO) 10.4.4 Weighted average 10.4.5 Base inventory 10.5 Other cost methods 10.5.1 Standard cost 10.5.2 Retail inventory and gross profit margin 10.6 Valuation of inventory using output values 10.7 Practice 10.8 Current replacement cost 10.9 Construction contracts 10.9.1 A worked example 10.10 Construction contracts in practice Summary References and research Exercises 196 198 198 198 199 200 200 201 202 202 203 205 205 205 206 206 208 208 208 211 213 213 213 After studying this chapter carefully, you should be able to: n explain the nature of inventory, and outline methods of its physical quantification; n define, calculate and appraise a variety of methods of valuing inventory under historical cost; n outline regulatory requirements for inventory valuation; n outline output value methods for inventory valuation; n outline the problems of evaluating long-term construction contracts, and describe, simply illustrate and appraise the completed contract and percentage of completion methods of their evaluation. 195 FINA_C10.qxd 4/13/07 2:26 PM Page 196 www.downloadslide.com Chapter 10 · Inventories 10.1 Introduction This chapter considers issues relating to the counting and valuation of inventories. Inventories are current assets, tangible in nature, that are, or will become, part of the product to be sold by an enterprise. As discussed in Part 1 of this book, conventional accounting is generally based on the recording of transactions and on revenue and expense calculation, rather than on valuations. Consequently, when calculating the depreciation of assets as analysed in the previous chapter, .