Chapter 6

Inventory

Inventory

All Costs

GAS vs CGS

Goods available for sale vs Cost of goods sold

Periodic vs perpetual

At a set time period vs continuous tracking of inventory

Shrinkage

Inventory loss due to theft fraud or error

Income Statement

Net sales

FOB Shipping point

Owned by buyer the moment they leave sellers premises

FOB Destination point

Owned by buyer when delivered

Purchase returns and allowances

a reduction in cost inventory

Purchase discounts

A cash discount for quick payment on purchase

Sales returns and allowances

A sales reduction to customers +xR, -R

Sales discounts

A discount if customer pays promptly

BI+ P-EI=

COGS

BI+P-CGS=

Ending Inventory

Purchased inventory on account

Debit inventory, credit AP

Pays money to delivery driver

Debit inventory, credit cash

Merchandiser returns inventory to supplier

Debit AP, Credit Inventory

Purchased 10,500 inventory with terms 2/10, n/30

Debit AP 10500, credit Cash 9800, inventory 200

Sells merchandise in perpetual inventory system

Debit cash, credit sales revenue for sales price

Debit COGS, and credit inventory for purchase price

Sales on Account and sales discounts

Debit accounts receivable, and credit sales revenue for sales price

Debit COGS, and credit Inventory for purchase price

Sales discount pay in 10 days

Debit cash for full amount- 10%, and 10% in sales discounts

Credit AR for full amount

Net sales

Sales- returns, allowances, discounts

Sales net- COGS=

Gross Profit

Gross Profit- expenses, taxes

Net income