Manual Project Ch 6

• Beginning inventory  +
• Net Purchases(include freight-in)  -
• Ending Inventory   =
• Cost of goods sold

• 1. Count inventory
• 2. Summarize Inventory
• 3. Determine correct unit cost of inventory
• 4. Extend price times quantity and add totals
• 5. Record in journal and post to ledger

Tags or count sheets can be used. One person verifies a count then a second person verifies a count. If the two counts match its good, if not then a recount.

Same type of inventory  in more than one place is combined.  So the company needs to count and organize in a way to fit their reporting needs.

• 1 costing method and type of inventory.
• 2.LIFO, FIFO, or weighted average.
• 3.Freight, handling, labor and overhead cost.
• 4.Lower of cost or market

• process is mechanical
• raw material, work-in-process, finished goods totaled seperatly

Adjusting entries are made depending on the recording process of inventory

• Beginning Inventory  +
• Purchases   -
• Cost of goods sold   =
• Ending Inventory

calculated at each sale based on the inventory costing method

• Record the sale-selling price
• Record the cost of goods sold- at cost

Higher cost to maintain record keeping

• 1. quantity and dollar value on hand at any time for any item can be determined
• 2. provides check on accuracy of cost of good sold and  measure of losses by theft or spoilage

used to compare to perpetual record. Can reveal errors and theft. Frequency of count depends on past differences.

Record of unit and unit cost of each type of inventory, without dollar balance. Not the perpetual inventory method because cost of goods sold not calculated.

helps control inventory stock levels and determine theft

Prevents theft or misuse.

• 1. Second count by independent team 
• 2. Recalculation of unit and total costs