What are two important steps in the reporting of inventory at the end of the acc

Question

What are two important steps in the reporting of inventory at the end of the accounting period?

How many classifications of inventory do Merchandising companies have?

In manufacturing companies, what are the 3 categories of inventory?

What is the JIT inventory method? Then, give an example of a Fortune-500 company that is using it.

In terms of determining inventory, if you are using a perpetual system, what are the two reasons for collecting a physical inventory?

What are consigned goods?

What are cost flow assumptions?

What is the consistency concept?

what is the gross profit method?

what is the retail method?

Explanation / Answer

1.The two important steps in the reporting of inventory at the end of the accounting period are classification of inventory based on the degree of completeness and determination of inventory amounts

a.The classification of inventory based on whether the firm or company is manufacturing or merchandising(retail) ie., in case of manufacturing the inventory is owned by company while in merchandising the inventory is in the form of ready for sale form

2.In merchandising only one form of inventory exists that is merchandising inventory

3.In case of manufacturing into three categories such as Finished Godds,Work in progress and raw materials

4.JIT(Just in Time) is a system in whose objective is to produce or procure products or components those are required by a customer or for use,rather thn for stock

For example AWT labels and packing uses JIT supplies to reduce Inventory and warehouse spares

5.Perpetual inventory system provides a running balance of cost of goods.The accuracy of this balance is periodically asured by a physical count-usually once a year.The common reasons of such difference include inaccurate record.

6.Consignment occurs when goods are sent by their owner (the consignor) to an agent(the consignee),who undetakes to sell the goods.The consignor continues to own the goods until they are sold,so the goods appear as inventory in the accounting records of the consignor,not the consignee.Those goods are called Consigned goods.

7.Cost flow assumptions refers to the methods available for moving the costs of a company's products from its inventory to its cost of goods sold.The cost flow assumptions include LIFO,FIFO,Weighted Average.

8.The consistency principle states that,once you adopt an accounting principle or method,continue to follow it in future accounting periods.Only change in accounting princple or method if the new version in some way improves reported financials.

9.The gross profit method is a technique used to estimate the amount of ending inventory

10.Retail method is a technique used to estimate the value of ending using the cost of retail price ratio.Retail method involves the following steps:Determine the retail value of goods available for sale during the period by adding the retail value of beginning inventory and retail value of goods purchased.

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