TAILIEUCHUNG - Ebook Principles of accounting I (5th edition): Part 2

The book helps you understand basic accounting concepts and offer extra practice on topics such as debits, credits, the chart of accounts, the ledger, inventory measurement, net realizable value, recovery of bad debts, and methods for computing interest. Coverage also includes fixed assets, depreciation and scrap value, methods of depreciation, payroll, and payroll taxes. | CHAPTER 8 Costing Merchandise Inventory INTRODUCTION In a mercantile business inventory is merchandise that is held for resale. As such it will ordinarily be converted into cash in less than a year and is thus a current asset. In a manufacturing business there will usually be inventories of raw materials and goods in process in addition to an inventory of finished goods. Since we have discussed the Merchandise Inventory account as it relates to the work sheet Chap. 7 let US now examine how the merchandise inventory amount is calculated. 82 PERIODIC AND PERPETUAL METHODS OF INVENTORY Under the periodic method inventory is physically counted at regular intervals annually quarterly or monthly . When this system is used credits are made to the Inventory account or to Purchases not as each sale is made but rather in total at the end of the inventory period. The perpetual method is generally used when units are of relatively high value. Running balances by unit and by cost are maintained for units purchased and sold. Individual receipts of goods are debited to the Inventory account and individual sales are credited to this account. At the end of the accounting period the cost of goods sold can be determined by adding the costs of the individual items sold. EXAMPLE 1 If goods were purchased for 10 000 under the periodic system the account Purchases would be debited. However under the perpetual system everything would be debited to Merchandise Inventory. Conversely every time a sale is made the account is credited. EXAMPLE 2 If goods costing 6 000 were sold for 10 000 under the periodic system Sales Income would be credited for the sale of 10 000. Accounts Receivable 10 000 Sales Income 10 000 187 188 COSTING MERCHANDISE INVENTORY CHAP. 8 However under the perpetual system of valuation even though the sale is recognized and treated in the same manner a second entry is required to show the reduction in the value of Merchandise Inventory. Accounts Receivable Sales Income

• Quản trị kinh doanh
• Principles of accounting I
• Costing merchandise inventory
• Repetitive transaction
• Receivables and payables
• Cash and its control
• Accounting principles I
• Principles of accounting
• Recording transactions
• Financial statements
• The accounting cycle
• Accounting concepts
• Classifying transactions
• Accounting principles
• Merchandising company
• Subsidiary ledgers
• Special journals
• Operating assests