Can you tell me if my answer is right for ending inventory and cost of goods sold?
Perpetual Inventory System Perpetual inventory system updates inventory accounts after each purchase or sale. Inventory subsidiary ledger is updated after each transaction. Inventory quantities are updated continuously. Periodic Inventory System Periodic inventory system records inventory purchase or sale in “Purchases” account. “Purchases” account is updated continuously, however, “Inventory” account is updated on a periodic basis, at the end of each accounting period (e.g., monthly, quarterly) Inventory subsidiary ledger is not updated after each purchase or sale of inventory. Inventory quantities are not updated continuously. Inventory quantities are updated on a periodic basis. Example 1 (Company A) On May 1, 2010: Purchased 1,000 units of merchandise at $30 per unit. Under Perpetual inventory system 5/1/2010 Debit Credit Merchandise Inventory 30,000 Accounts payable 30,000 Under Periodic inventory system 5/1/2010 Debit Credit Purchases 30,000 Accounts payable 30,000 Under periodic
You have already seen that inventory for a merchandising business consists of the goods available for resale to customers. However, retailers are not the only businesses that maintain inventory. Manufacturers also have inventories related to the goods they produce. Goods completed and awaiting sale are termed “finished goods” inventory. A manufacturer may also have “work in process” inventory consisting of goods being manufactured but not yet completed. And, a third category of inventory is “raw material,” consisting of goods to be used in the manufacture of products. Inventories are typically classified as current assets on the balance sheet. A substantial portion of the managerial accounting chapters of this book deal with issues relating to accounting for costs of manufactured inventory. For now, we will focus on general principles of inventory accounting that are applicable to most all enterprises. DETERMINING WHICH GOODS TO INCLUDE IN INVENTORY: Recall from the merchandising chapt
Perpetual Inventory System Perpetual inventory system updates inventory accounts after each purchase or sale. Inventory subsidiary ledger is updated after each transaction. Inventory quantities are updated continuously. Periodic Inventory System Periodic inventory system records inventory purchase or sale in “Purchases” account. “Purchases” account is updated continuously, however, “Inventory” account is updated on a periodic basis, at the end of each accounting period (e.g., monthly, quarterly) Inventory subsidiary ledger is not updated after each purchase or sale of inventory. Inventory quantities are not updated continuously. Inventory quantities are updated on a periodic basis. Example 1 (Company A) On May 1, 2010: Purchased 1,000 units of merchandise at $30 per unit. Under Perpetual inventory system 5/1/2010 Debit Credit Merchandise Inventory 30,000 Accounts payable 30,000 Under Periodic inventory system 5/1/2010 Debit Credit Purchases 30,000 Accounts payable 30,000 Under periodic
