Advantages and disadvantages inventory procedure, Accounting Basics

Assignment Help:

Q. Advantages and disadvantages inventory procedure?

Advantages as well as disadvantages of specific identification Companies that utilize the specific identification method of inventory costing state their cost of goods sold and ending inventory at the actual cost of specific units sold and on hand. Some accountants disagree that this method provides the most precise matching of costs and revenues and is thus the most theoretically sound method. This statement is factual for some one-of-a-kind items such like autos or real estate. For these items utilize of any other method would seem illogical.

One disadvantage of the specific identification method is that it allows the manipulation of income. For instance assume that a company bought three identical units of a given product at different prices. One unit cost USD 2000 and the second cost USD 2100 and the third cost USD 2200. The company trade one unit for USD 2800. The units are similar so the customer doesn't care which of the identical units the company ships. But the gross margin on the sale could be either USD 800 USD 700 or USD 600 depending on which unit the company ships.


Related Discussions:- Advantages and disadvantages inventory procedure

Explain in detail about the merchandise inventory, Explain in detail about ...

Explain in detail about the MERCHANDISE INVENTORY Cost of merchandise purchased during an accounting period is debited to Purchases account. To determine VALUE of the goods on

Accounting concept., what is implication wrongly application of accounting ...

what is implication wrongly application of accounting concept#

Partnership act, If partners do not draw up a partnership agreement, the pr...

If partners do not draw up a partnership agreement, the provisions of the Partnership Act apply on which statement is true like a provision of the Partnership Act? A Interest on

Explain cash flow statement, Explain:- 1. Why would users want to see cash ...

Explain:- 1. Why would users want to see cash flows broken out into three parts (operating, investing, and financing)? What's the purpose of this structure? 2. Companies often use

Recording private company credit card sales, Recording Private Company Cred...

Recording Private Company Credit Card Sales Goes to the individual company-not a bank. Treated as a sale on account. Credit card Company is responsible for collection of

Determining entries for January, Received $170,000 cash from Electronic Art...

Received $170,000 cash from Electronic Arts, Inc. for service revenue earned in January.

Explain the purpose and objective of accounting, Weekly tasks or assignment...

Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy fou

Summary of significant accounting policies, Q. Summary of significant accou...

Q. Summary of significant accounting policies? As part of their annual reports companies comprise summaries of significant accounting policies. These policies help users in int

Explain an oligopoly, Oligopoly is a market where the supply is controlled ...

Oligopoly is a market where the supply is controlled by a little group of companies. In this condition, the actions of single company will have a material effect on the entire mark

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