ACCT chapter 6

Costs are included in the cost of goods sold in the order in which they were purchased

FIFO

Often provides results that are about the same as those that would have been obtained using the specific identification method

FIFO

This is often the same as the physical flow of goods

FIFO

When do controls for safeguarding inventory begin

as soon as the inventory is ordered

why do people use LIFO now

for tax purposes, it is now widely used even when it doesnt represent the physical flow of goods

Why did people use to use LIFO

in the rare cases where the units sold were from the most recent purchases

How are the three documents used for inventory control

once the inventory is received, a receiving report is made, which is compared with the purchase order. The quantity, price, and descriptions of the items are then compared with the vendors invoice if all agree then the inventory is recorded in the accounting records. if not, it should be investigated and reconciled

documents used for inventory control

purchase order receiving report vendors invoice

Two Primary Objectives of Control Over Inventory

safeguarding the inventory from theft or damage reporting inventory in the financial statements