ch06 Financial Accounting 财务会计

1、chapter 6 inventories 存货 study objectives describe the steps in determining inventory quantities prepare the entries for purchases and sales of inventory under a periodic inventory system determine cost of goods sold under a periodic inventory system identify the unique features of the income statem

2、ent for a merchandiser using a periodic inventory system study objectives explain the basis of accounting for inventories and describe the inventory cost flow methods explain the financial statement and tax effects of each of the inventory cost flow methods explain the lower of cost or market basis

3、of accounting for inventories study objectives indicate the effects of inventory errors on the financial statements compute and interpret the inventory turnover ratio inventory basics in the balance sheet of merchandising and manufacturing companies, inventory is frequently the most significant curr

4、ent asset in the income statement, inventory is vital in determining the results of operations for a particular period gross profit (net sales - cost of goods sold) is closely watched by management, owners, and other interested parties merchandise inventory characteristics merchandise inventory has

5、two common characteristics: - it is owned by the company and - it is in a form ready for sale to customers in the ordinary course of business classifying inventory in a manufacturing environment unlike merchandise inventory, manufacturing inventory may not yet be ready for sale as a result, inventor

6、y is usually classified into three categories: finished goods, inventory which is completed and ready for sale. work in process, inventory in various stages of production and not yet completed. raw materials, components on hand waiting to be used in production. determining inventory quantities in or

7、der to prepare financial statements, it is necessary to determine the number of units of inventory owned by the company at the statement date, and to value them determining inventory quantities the determination of inventory quantities involves - taking a physical inventory of goods on hand - determ

8、ining the ownership of goods. determining inventory quantities taking a physical inventory involves counting, weighing or measuring each kind of inventory on hand. taking a physical inventory a company, in order to minimize errors in taking the inventory, should adhere to internal control内部控制内部控制 pr

9、inciples by adopting the following procedures: - employees who do not have custodial responsibility for the inventory should do the counting. - each counter should establish the authenticity of each inventory item taking a physical inventory - another employee should make a second count - all invent

10、ory tags should be pre-numbered and accounted for - at the end of the count, a designated supervisor should ascertain that all inventory items are tagged and that no items have more than one tag. goods in transit在途商品在途商品 should be included in the inventory of the party that has legal title to the go

11、ods. for fob (free on board) shipping point, ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller. determining ownership of goods seller buyer public carrier fob shipping point ownership passes here to buyer for fob destination point, legal title to th

12、e goods remains with the seller until the goods reach the buyer. determining ownership of goods fob destination point public carrier buyer seller ownership passes here to buyer determining ownership of goods in transit under a consignment arrangement代销代销, the holder of the goods (called the consigne

13、e) does not own the goods. ownership remains with the shipper of the goods (consignor) until the goods are actually sold to a customer. consigned goods should be included in the consignors inventory not the consignees inventory. consignee company determining ownership of goods in transit consignor i

14、nventory accounting systems one of two basic systems of accounting for inventories may be used: - the perpetual inventory system 永续存货系统永续存货系统 - the periodic inventory system 盘存制盘存制 periodic inventory system in a periodic inventory system, no attempt is made on the date of sale to record the cost of

15、the merchandise sold. instead, a physical inventory count is taken at the end of the period to determine - the cost of the merchandise then on hand and - the cost of goods sold during the period when merchandise is purchased for resale to customers, the temporary account, purchases采购采购, is debited f

16、or the cost of goods. like sales, purchases may be made for cash or on account (credit). purchases of merchandise the purchase is normally recorded by the purchaser when the goods are received from the seller. each credit purchase should be supported by a purchase invoice购买发票购买发票. purchases of merch

17、andise periodic system transactions sellers electronix date account title drcr may 4 accounts receivable sales (to record credit sales to beyer video ) 3800 3800 periodic system transactions beyer video date account title drcr may 4 purchases accounts payable (to record purchase goods on account fro

18、m electronix , term 2/10, n/30 ) 3800 3800 purchases is a temporary account whose normal balance is a debit. periodic system transactions sellers electronix date account title drcr may 8 sales return and allowance accounts receivable (to record return goods from beyer video ) 300 300 periodic system

19、 transactions beyer video date account title drcr may 4 accounts payable purchase return and allowance (to record return goods to electronix ) 300 300 purchases return and allowance is a temporary account whose normal balance is a credit . periodic system transactions beyer video date account title

20、drcr may 9 freight-in cash (to record payment freight ,terms fob shipping point ) 150 150 freight-in is a temporary account whose normal balance is a debit . periodic system transactions sellers electronix date account title drcr may 15cash sales discount accounts receivable (to record collection fr

21、om beyer video within discount period ) 3430 70 3500 periodic system transactions beyer video date account title drcr may 15 accounts payable cash purchase discount (to record payment to sellers within discount period ) 3500 3430 70 purchase discount is a temporary account whose normal balance is a

22、credit cost of goods sold to determine the cost of goods sold under a periodic inventory system, it is necessary to: - record purchases of merchandise - determine the cost of goods purchased - determine the cost of goods on hand at the beginning and end of the accounting period normal balances: cost

23、 of goods purchased accounts we used 4 accounts to record the purchase of inventory under a periodic inventory system. these accounts are: normal accountbalance purchases purchase returns and allowances purchase discounts freight-in debit credit credit debit cost of goods purchased (cogp) to determi

24、ne cost of goods purchased: - subtract purchase returns and allowances and purchase discounts from purchases to produce net purchases. - add freight-in to net purchases to produce cost of goods purchased cogp= purchases purchase return purchase discounts + freight-in computation of net purchases and

25、 cost of goods purchased cost of goods purchased is determined as follows: purchases $ 325,000 less: purchases returns and allowances 10,400 purchase discounts 6,800 17,200 net purchases 307,800 add: freight-in 12,200 cost of goods purchased $ 320,000 determining cost of goods on hand under the peri

26、odic method, cost of inventory on hand is determined from a physical inventory requiring: - counting the units on hand for each inventory item - applying unit costs to the total units on hand for each inventory item - totaling the cost of each item of inventory to determine total cost of goods on ha

27、nd determining cost of goods sold computing cost of goods sold involves 2 steps: - add the cost of goods purchased to the beginning cost of goods on hand to obtain the cost of goods available for sale. - subtract the ending cost of goods on hand from the cost of goods available for sale to arrive at

28、 the cost of goods sold beginning inventory $ 36,000 add: cost of goods purchased 320,000 cost of goods available for sale 356,000 less: ending inventory 40,000 cost of goods sold $ 316,000 computation of cost of goods sold cost of goods sold is determined as follows: illustration 6-5 income stateme

29、nt for a merchandising company using a periodic inventory system sellers electronix inc. income statement for the year ended december 31, 2002 sales revenues sales$480,000 less: sales returns and allowances$ 12,000 sales discounts8,00020,000 net sales460,000 cost of goods sold inventory, january 136

30、,000 purchases$325,000 less: purchases returns and allowances10,400 purchases discounts6,800 net purchases307,800 add: freight-in12,200 cost of goods purchased320,000 cost of goods available for sale356,000 inventory, december 3140,000 cost of goods sold316,000 gross profit144,000 operating expenses

31、 store salaries expense45,000 rent expense19,000 utilities expense17,000 advertising expense16,000 depreciation expense store equipment8,000 freight-out7,000 insurance expense2,000 total operating expenses114,000 net income$ 30,000 the income statement under a periodic inventory system contains 3 di

32、stinctive features: 1 a sales revenue section, 2 a cost of goods sold section, and 3 gross profit. inventoriable costs the primary basis of accounting for inventories is cost as required by the cost principle under the matching principle, the major objective in accounting for inventories is the matc

33、hing of appropriate costs with sales revenues these two principles guide the decisions about determining and allocating inventoriable costs determining inventoriable costs all costs necessary to acquire the goods and place them in a condition ready for sale are included in inventoriable costs invent

34、oriable costs include the invoice price plus freight-in less purchase discounts and purchase returns and allowances determining inventoriable costs inventoriable costs may be regarded as a pool of costs that consist of two elements: - cost of the beginning inventory and - cost of the goods purchased

35、 during the year the sum of these elements equals the cost of goods available for sale determining inventoriable costs inventoriable costs are allocated between ending inventory and cost of goods sold under a periodic inventory system, the allocation is made at the end of the accounting period: dete

36、rmining inventoriable costs - the costs assignable to the ending inventory are determined - the cost of the ending inventory is subtracted from the cost of goods available for sale to determine the cost of goods sold - cost of goods sold is then deducted from sales revenues in accordance with the ma

37、tching principle beginning inventory cost of goods purchased + cost of goods available ending inventory cost of goods sold beginning inventory + cost of goods purchased = cost of goods available ending inventory + cost of goods sold pool of costs cost of goods available for sale beginning inventory$

38、 20,000 cost of goods purchased100,000 cost of goods available for sale step 1step 2 ending inventorycost of goods sold unittotalcost of goods available for sale$120,000 unitscostcostless: ending inventory15,000 5,000$ 3.00cost of goods sold allocation (matching) of pool of costs $120,000 $15,000 $1

39、05,000 using actual physical flow costing costing of the inventory is complicated because the units on hand for a specific item of inventory may have been purchased at different prices. using actual physical flow costing the specific identification method tracks the actual physical flow of the goods

40、. each item of inventory is marked, tagged, or coded with its specific unit cost. items still in inventory at the end of the year are specifically costed to arrive at the total cost of the ending inventory. using assumed cost flow methods other cost flow methods are allowed since specific identifica

41、tion is often impractical. these methods assume flows of costs that may be unrelated to the physical flow of goods. using assumed cost flow methods for this reason we call them assumed cost flow methods or cost flow assumptions. they are: - first-in, first-out (fifo 先进先出先进先出). - last-in, first-out (

42、lifo 后进先出后进先出). - average cost (avc, 平均成本法平均成本法). fifo 先进先出先进先出 the fifo method assumes that the earliest goods purchased are the first to be sold. fifo often reflects the actual physical flow of merchandise since it is normally sound business practice to sell the oldest units first. therefore, unde

43、r fifo, the costs of the earliest goods purchased are the first to be recognized as cost of goods sold. step 1step 2 ending inventorycost of goods sold unittotal dateunitscostcost 11/27400$ 13$ 5,200cost of goods available for sale$ 12,000 08/245012600less: ending inventory5,800 450cost of goods sol

44、d fifo method pool of costs cost of goods available for sale unittotal dateexplanationunitscostcost 01/01beginning inventory100 $10$ 1,000 04/15purchase200 112,200 08/24purchase300 123,600 11/27purchase400 135,200 total1,000 $ 12,000 $ 5,800 $ 6,200 selling 550 units 100 $ 10 $ 1,000 200 11 2,200 25

45、0 12 3,000 550 $ 6,200 proof of cost of goods sold the accuracy of the cost of goods sold can be verified by recognizing that the first units acquired are the first units sold. unittotal dateunitscostcost 01/01x= 04/15x= 08/24x= total lifo 后进先出后进先出 the lifo method assumes that the latest goods purch

46、ased are the first to be sold. lifo seldom coincides with the actual physical flow of inventory. under lifo, the costs of the latest goods purchased are the first to be recognized as cost of goods sold. step 1step 2 ending inventorycost of goods sold unittotal dateunitscostcost 01/01100$ 10$ 1,000 0

47、4/15200112,200cost of goods available for sale$ 12,000 08/24150121,800less: ending inventory5,000 450cost of goods sold lifo method pool of costs cost of goods available for sale unittotal dateexplanationunitscostcost 01/01beginning inventory100 $10$ 1,000 04/15purchase200 112,200 08/24purchase300 1

48、23,600 11/27purchase400 135,200 total1,000 $ 12,000 $ 5,000 $ 7,000 proof of cost of goods sold the cost of the last goods in is the first to be assigned to cost of goods sold. under a periodic inventory system, all goods purchased during the period are assumed to be available for the first sale, re

49、gardless of the date of purchase. unittotal dateunitscostcost 11/27x= x=08/24 total 400 $ 13 $ 5,200 150 12 1,800 550 $ 7,000 average cost 平均成本平均成本 the average cost method assumes that the goods available for sale are homogeneous. the allocation of the cost of goods available for sale is made on the

50、 basis of the weighted average unit cost incurred. the weighted average unit cost is then applied to the units on hand to determine the cost of the ending inventory. step 1step 2 ending inventorycost of goods sold $ 12,0001,000=$12.00 unittotalcost of goods available for sale$ 12,000 unitscostcostle

51、ss: ending inventory5,400 450 x$ 12.00=cost of goods sold average cost method pool of costs cost of goods available for sale unittotal dateexplanationunitscostcost 01/01beginning inventory100 $10$ 1,000 04/15purchase200 112,200 08/24purchase300 123,600 11/27purchase400 135,200 total1,000 $ 12,000 $

52、5,400 $ 6,600 use of cost flow methods in major u.s. companies fifo44% lifo33% avc19% other 4% the reasons why companies adopt different inventory cost flow methods income statement effects balance sheet effects tax effects income statement effects compared kralik company buys 200 xr492s at $20 per

53、unit on january 10 and 200 more on december 31 at $24 each. during the year, 200 units are sold at $30 each. fifo sales (200 30 ) $ 6,000 less: cogs (20020) 4,000 gross profit $2,000 lifo sales (200 30 ) $ 6,000 less: cogs (20024) 4,800 gross profit $1,200 difference =2000 1200 = $ 800 using invento

54、ry cost flow methods consistently a company needs to use its chosen cost flow method consistently一致地一致地 from one accounting period to another. such consistent application enhances the comparability可比性可比性 of financial statements over successive time periods. when a company adopts a different cost flo

55、w method, the change and its effects on net income should be disclosed in the financial statements. when the value of inventory is lower than the cost, the inventory is written down to its market value. this is known as the lower of cost or market (lcm) method. under the lcm basis, market is defined

56、 as current replacement cost目前重置成本目前重置成本, not selling price. lower of cost or market 市价与成本市价与成本 孰低孰低 lower of cost or market lower of cost or market by: individualmajortotal costmarketitemscategoriesinventory television sets consoles$ 60,000$ 55,000$ 55,000 portables45,00052,00045,000 total105,00010

57、7,000$ 105,000 video equipment recorders48,00045,00045,000 movies15,00014,00014,000 total63,00059,00059,000 total inventory$ 168,000$ 166,000 $ 159,000 $ 164,000 $ 166,000 both beginning and ending inventories appear on the income statement. the ending inventory of one period automatically becomes t

58、he beginning inventory of the next period. inventory errors affect the determination of cost of goods sold and net income. inventory errors - income statement effects formula for cost of goods sold + = beginning inventory cost of goods purchased ending inventory cost of goods sold _ the effects on c

59、ost of goods sold can be determined by entering the incorrect data in the above formula and then substituting the correct data. effects of inventory errors on current years income statement cost of inventory errorgoods soldnet income understate beginning inventory understated overstated overstate be

60、ginning inventory overstated understated understate ending inventory overstated understated overstate ending inventory understated overstated an error in ending inventory of the current period will have a reverse effect on net income of the next accounting period. assets = liabilities + owners equit