会计英语（简明版） Lesson 6 Inventory and Cost of Goods Sales.ppt

YESUNAccountingEnglish 2009 1 Lesson6 InventoryandCostofGoodsSales YESUNAccountingEnglish 2009 2 InventoryIssues Whatisinventory Whatcostsareincludedininventory HowdoweseparateCOGSfromEnd Inv YESUNAccountingEnglish 2009 3 InventoriesDefinition Assetitemsheldforsaleintheordinarycourseofbusinessorgoodsthatwillbeusedorconsumedintheproductionofgoodstobesold YESUNAccountingEnglish 2009 4 TypesofCompanies MerchandisingcompanySellsgoodsinsameformasacquired ManufacturingcompanyConvertsrawmaterialintofinishedgoods ServicecompanyProvidesintangibleservices YESUNAccountingEnglish 2009 5 TypesofCompanies Inventories MerchandisingSellsgoodsinsameforminwhichtheyareacquired Inventorycosts andcostsofgoodssold acquisitioncosts YESUNAccountingEnglish 2009 6 TypesofCompanies Inventories Cont Manufacturingcompanyconvertsrawmaterialsandpurchasedpartsintofinishedgoods 3typesofinventories Materials Work in process Finishedgoods YESUNAccountingEnglish 2009 7 TypesofCompanies Inventories Cont Serviceorganizations hotels beautyparlors plumbers Mayhavematerialsinventories YESUNAccountingEnglish 2009 8 TypesofCompanies Inventories Cont Professionalservicefirms accountingfirms legalfirms Intangibleinventorycostsarecostsincurredforclientbutnotyetbilledcalledjobs in progressorunbilledcosts YESUNAccountingEnglish 2009 9 Supplies Tangibleitemsthatwillbeconsumedinthecourseofnormaloperations e g officesupplies lubricants repairparts Notsoldandnotaccountedforaspartofcostofgoodssold YESUNAccountingEnglish 2009 10 MerchandiseInventory Inventoriesaccountedforatcost CostincludescostofAcquiringmerchandise invoicecostofgoods freight in Makinggoodsreadyforsale unpackingandmarking YESUNAccountingEnglish 2009 11 MethodsofAccountingforPurchase orcash Discounts Recordatinvoiceprice inchina Recorddiscountwhentaken NetofdiscountChargediscountsnottakenwhenpaid YESUNAccountingEnglish 2009 12 Terminology Purchase receiptofmerchandisenottoplacingofapurchaseorder Usuallytitletransferswhengoodsareshipped FOBshippingpoint YESUNAccountingEnglish 2009 13 RelationshipofInventoryandCostofGoodsSold Beginninginventory netpurchases goodsavailableforsaleGoodsavailableforsale costofgoodssold endinginventory Equivalently Beg inventory netpurchases endinginventory costofgoodssold Netpurchases grosspurchases purchasereturnsandallowances freight in YESUNAccountingEnglish 2009 14 MeasurementIssue DividinggoodsavailableforsalebetweenCOGSandEnd Inventory 2approaches Periodicinventorymethod Perpetualinventorymethod YESUNAccountingEnglish 2009 15 PeriodicInventoryMethod Determineamountofendinginventoryanddeducecostsofgoodssold Countinventory i e aphysicalinventoryistaken attheendoftheperiod Multiplycounttimescostforeachitemtodeterminetotalamountofinventory Beginninginventoryofcurrentperiod endinginventoryofprecedingperiod COGS COGA End Inventory YESUNAccountingEnglish 2009 16 PerpetualInventoryMethod Measureamountactuallydeliveredtocustomers deduceendinginventory Perpetualinventoryrecordiskeptforeachitemintheinventory Advantagesofperpetualinventorymethod Detailedrecordisuseful Builtincheck Identifiesshrinkagebyitem Incomestatementcanbepreparedwithouttakingaphysicalinventory YESUNAccountingEnglish 2009 17 InventoryCostingMethods CostFlowAssumptions Specificidentification Averagecost FIFOLIFO YESUNAccountingEnglish 2009 18 SpecificIdentification Bigticket highprice items Uniquelyidentifieditems Mayofferopportunitytomanipulatecosts YESUNAccountingEnglish 2009 19 AverageCost Beginninginventoryamount purchases unitsavailableforsale perunitinventorycosts perunitcostofgoodssoldPeriodicmethod Computedfortheentireperiod Perpetualmethod Anewunitcostcanbecalculatedaftereachpurchase YESUNAccountingEnglish 2009 20 First in First out FIFO Expensescostsofoldestpurchasesfirst Mostrecentlypurchasedgoodsareininventory Likelybutnotnecessarytofollowactualflowofgoods Endinginventoryapproximatescurrentcostofgoods YESUNAccountingEnglish 2009 21 Last in First out LIFO AssumesmostrecentlypurchasedgoodsaresoldfirstInventorybasedoncostsofoldestpurchases Costofgoodssoldusuallydoesnotreflectphysicalflow Endinginventorymaybecostedatamountsofyearsago Inventorymaybewellbelowcurrentcosts YESUNAccountingEnglish 2009 22 YESUNAccountingEnglish 2009 23 ArgumentsforFIFO Usuallyfollowsphysicalflowofgoods Ifpricesarebasedonoldestcost resultsinbestmatching Moreaccuratebalancesheetvaluation Non theoretical practicalargument Resultsinhighestincomeduringperiodsofrisingprices YESUNAccountingEnglish 2009 24 ArgumentsforLIFO Ifpricesarebasedoncurrentcosts resultsinbestmatchingofrevenuesandcostsandthereforemostusefulincomestatement Closesttoreflectingcurrentorreplacementcostsofgoodssold However itisstillhistoricalcostsanddoesdifferfromcurrentcosts YESUNAccountingEnglish 2009 25 ArgumentsforLIFO cont Duringperiodsofpriceincreases Highercostsofgoodssold Lowertaxableincome Lowerincometaxes Highercashflows IfLIFOfortaxpurposesthanalsofinancialreporting YESUNAccountingEnglish 2009 26 WhyNotMoreLIFO IASandmostcountriesdonotpermit Wouldrequireadoublesetofbooks Pricesofsomeitemsarenotincreasing BecauseofIRSconformityrequirement lowerearningsreportedtoshareholders YESUNAccountingEnglish 2009 27 ThePrincipleofConsistency Onceacompanyhasadoptedaparticularaccountingmethod itshouldfollowthatmethodconsistently ratherthanswitchmethodsfromoneyeartothenext YESUNAccountingEnglish 2009 28 LCMandOtherWrite DownsofInventory Reducesthevalueoftheinventory Obsolescence AdjustinventoryvaluetothelowerofhistoricalcostorNetrealizablevalue market LowerofCostorMarket LCM YESUNAccountingEnglish 2009 29 LowerofCostorMarket LCM Marketpricemaybebelowcostdueto Physicaldeterioration Changeinconsumertastes Technologicalobsolescence LCMisareflectionofconservatismconcept Marketisdefinedasnetrealizablevalue YESUNAccountingEnglish 2009 30 Netrealizablevalue NRV NRV estimatedsellingprice estimatedcostsofselling Soinventorynotabovecashthatwillbereceived YESUNAccountingEnglish 2009 31 StepsinApplyingLCM Computemarket Selectlowerofcostormarket YESUNAccountingEnglish 2009 32 Inventoryestimationmethod YESUNAccountingEnglish 2009 33 TheGrossProfitMethod Determinecostofgoodsavailableforsale Estimatecostofgoodssoldbymultiplyingthenetsalesbythecostratio Deductcostofgoodssoldfromcostofgoodsavailableforsaletodetermineendinginventory YESUNAccountingEnglish 2009 34 TheGrossProfitMethodExample InMarchof1999 Chemico sinventorywasdestroyedbyfire Chemico snormalgrossprofitratiois30 ofnetsales Atthetimeofthefire Chemicoshowedthefollowingbalances YESUNAccountingEnglish 2009 35 TheGrossProfitMethodExample EstimateCostofGoodsSold YESUNAc