COMMERCE 1AA3 Lecture Notes - Lecture 15: Income Statement, Gross Profit, Financial Statement
Document Summary
Every time there is a purchase, a new weighted amount must be calculated, but this calculation does not have to be done until there is a sale. This is called the dynamic/moving weighted cost ( only used for perpetual) In fifo, periodic and perpetual ending inventory is the same. In weighted average, perpetual and periodic ending inventory is different. Wac periodic would result in the highest cost of goods sold. So if cogs is smaller, gross profit is higher and ending inventory is higher. So if cogs is bigger, gross profit is smaller, and ending inventory is smaller. Ifrs allows you to change method of inventory count , if the company believes that this is best course of action. However, all previous values must be changed to reflect the new method, so that the comparability is fulfilled vertically. Financial statements should disclose relevant and represented faithfully ( is inventory being stated as it"s proper value? )