Illustrate periodic inventory procedure, Accounting Basics

Assignment Help:

Q. Illustrate Periodic inventory procedure?

Companies by means of periodic inventory procedure make no entries to the Merchandise Inventory account nor do they maintain unit records during the accounting period. Therefore these companies have no up-to-date balance beside which to compare the physical inventory count at the end of the period. As well these companies make no attempt to determine the cost of goods sold at the time of each sale. In its place they compute the cost of all the goods sold during the accounting period at the end of the period. To conclude the cost of goods sold a company have to know

- Starting inventory cost of goods on hand at the beginning of the period.

- Net cost of purchases throughout the period.

- Ending inventory cost of unsold goods by the end of the period.

The company would demonstrate this information as follows

Beginning inventory                                                               $ 34,000

Add: Net cost of purchases during the period                                               140,000

Cost of goods available for sale during the period                             $174,000

Deduct: Ending inventory                                                      20,000

Cost of goods sold during the period                                                 $154,000

In this schedule notice that the company start the accounting period with USD 34000 of merchandise and purchased an additional USD 140000 making a total of USD 174000 of goods that could have been sold during the period. After that a physical inventory showed that USD 20000 remained unsold which implies that USD 154000 was the cost of goods sold during the period. Obviously the USD 154000 isn't necessarily the precise amount of goods sold because no actual record was made of the dollar cost of the goods sold. Periodic inventory procedure essentially assumes that everything not on hand at the end of the period has been sold. This method ignores problems such as breakage or theft because the Merchandise Inventory account contains no up-to-date balance at the end of the accounting period against which to compare the physical count.


Related Discussions:- Illustrate periodic inventory procedure

Limitations of funds flow statement, Limitations of Funds Flow Statement : ...

Limitations of Funds Flow Statement : despite the a variety of uses of the announcement, it has convinced problems also.  They consist of the subsequent i) It cannot substitute

Aging Approach., At the end of 2011 Samuda reported a balance in Account re...

At the end of 2011 Samuda reported a balance in Account receivable of $620,000 and estimated that $12,400 of this account would likely be uncollectible. The allowance for doubtful

Why are you expecting 50% growth scalar, I am expecting 50 growth because o...

I am expecting 50 growth because of the market size and consumers patronage, also because of latest product and service been introduced, also due to the competent working force wit

Heww inc., Heww Inc., issued a $50,000, 10 year bond with a stated interes...

Heww Inc., issued a $50,000, 10 year bond with a stated interest rate of 6%. Assume interest payments are made semi-annually. What is the selling price of the bond if the mark

The list of accounts below and the unadjusted balances, The list of account...

The list of accounts below and the unadjusted balances of these accounts were taken from the ledger of the Manville Corporation at the end of their accounting period, March 31,

Benefites of management accounting information, Benefites of Management acc...

Benefites of Management accounting information To obtain this benefit, businesses have become more 'customer driven' (which is, concerned with satisfying customer needs). This

Uses of accounting, uses of accounting as a software enginner

uses of accounting as a software enginner

FAC, Which of the following items will be entered in the cash payments jour...

Which of the following items will be entered in the cash payments journal of an entity when app applicable subsidiary journals are in use? Merchandise purchased on credit Merchand

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd