TAILIEUCHUNG - Lecture Intermediate accounting (Volume 1, 11th Canadian edition) – Chapter 8: Inventory

After studying this chapter, you should be able to: Understand inventory from a business perspective, define inventory from an accounting perspective, identify which inventory items should be included in ending inventory, identify the effects of inventory errors on the financial statements and adjust for them,. | 1 CHAPTER 8: INVENTORY 2 2 Chapter 8: Inventory After studying this chapter, you should be able to: Understand inventory from a business perspective. Define inventory from an accounting perspective. Identify which inventory items should be included in ending inventory. Identify the effects of inventory errors on the financial statements and adjust for them. Determine the components of inventory cost. Distinguish between perpetual and periodic inventory systems and account for them. Identify and apply GAAP cost formula options and indicate when each cost formula is appropriate. Explain why inventory is measured at the lower of cost and market, and apply the lower of cost and net realizable value standard. Identify inventories that are or may be valued at amounts other than the lower of cost and net realizable value. Apply the gross profit method of estimating inventory. Identify how inventory should be presented and the type of inventory disclosures required by IFRS and ASPE. Explain how inventory analysis provides useful information and apply ratio analysis to inventory. Identify differences in accounting between IFRS and ASPE, and what changes are expected in the near future. 3 3 Inventory 4 4 Inventory Classification Inventory is classified as a current asset A merchandising company: has one inventory account on the balance sheet called Merchandise Inventory; the cost of the inventory sold is transferred to Cost of Goods Sold (COGS) on the income statement A manufacturing company: will normally have three inventory accounts on the balance sheet: raw materials, work in process and finished goods; Cost of Goods Manufactured (COGM) is used by a manufacturer which is similar to the COGS 5 5 LO1 Inventory Cost Flows Manufacturing Operations $$$ COGM $$$ Raw Materials Direct Labour Mfg. Overhead COGS $$$ Work in Process Inventory Finished Goods COGS 6 6 LO1 Inventory Definition of Inventory: CPA Handbook Section 3031 under ASPE or IAS 2 under IFRS Inventories are .

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• Intermediate accounting
• Lecture Intermediate accounting
• Financial reporting
• Inventory classification
• Inventory cost flows
• Inventory cost flows
• Inventory errors
• Financial Accounting
• Accounting process
• Accounting equation
• Accounting processing cycle
• Stock issuance
• Estimating reserves
• Liquidating dividends
• Accounting changes
• Error corrections
• Accounting choices
• Theoretical structure
• Accrual accounting
• Financial accounting environment
• Accounting for leases
• Leasing environment
• Accounting by lessee
• Special accounting problems
• Cash versus accrual accounting
• International standard setting
• Accounting standards
• Accounting assists
• The challenges facing accounting
• Income taxes
• Accounting for income taxes
• Deferred tax liabilities
• Error analysis
• Accounting policy
• Accounting estimate
• Accounting policies
• Accounting information system
• Measurement issues
• Characteristics of accounting
• Capital allocation process