22107 Chapter Notes - Chapter 7: Current Asset, Income Statement
Document Summary
Inventory - tangible resource that is held fo resale in the normal course of operations; the phrase. Intended for resale" differentiates inventory from other assets. Inventory is recorded at its acquisition cost, including cost incurred for delivery or preparation for resale, as per the cost principle. Types of inventory systems: perpetual system - cost of goods sold is updated each time inventory is sold, periodic system - cost of goods sold is calculated and recorded only at the end of the period. Inventory is expected to be sold within a year and is reported on the balance sheet as a current asset; because it is rally large, cost of goods sold is reported as a seperate line on the income statement. Weighted average method - assigns the average costs of all units purchased to the cost of goods sold, so the cogs and ending inventory fall in between the fifo and fifo extremes.
