Accounting: inventory

periodic IS temporary acct: purchases and returns and allowances

A credit balanced contra-purchases acct used for the return of merchandise to suppliers or price reductions given by suppliers

periodic IS temporary acct: purchases discounts

A credit balanced, contra-purchases account used for prompt payment discounts

periodic IS temporary acct: freight in

A debit balanced account for shipping charges paid by purchaser, these charges will cause COG purchased to increase

periodic IS temporary acct: purchases

A debit balanced account used for inventory purchases

FOB shipping point

Buyer pays delivery charges (title to goods transfers at shipping point)

Perpetual inventory system

Continuous record of inventory acquired and sold is maintained in the inventory asset account. It shows the actual quantity and cost of the inventory on hand and COGS account shows total cost of merch sold during he period.

Inventory

Goods that businesses intend to sell to their customers as well as raw materials and in-process items.

Perpetual inventory system were used when

Inventory items were unique or specifically identifiable. More difficult to use in businesses with many identical items

FOB destination

Seller pays delivery (title to goods transfers at destination)

Periodic inventory system

Updates inventory, COGS accounts only once a period rather than continuously. Instead of debiting/crediting inventory, temporary accounts are used