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Pengantar Akuntansi 1: SESI - 12

This document provides an overview of inventory accounting concepts, including: 1. Classifying inventory as either merchandise or manufacturing and determining inventory quantities through physical counts and ownership rules. 2. Explaining the accounting for inventories using specific identification, first-in first-out (FIFO), and average costing methods. Under FIFO, the earliest goods purchased are assumed to be sold first, matching older historical costs with current revenues. 3. Illustrating inventory cost flow assumptions and calculations using examples, showing how beginning inventory plus purchases minus cost of goods sold equals ending inventory under different methods.

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35 views

Pengantar Akuntansi 1: SESI - 12

This document provides an overview of inventory accounting concepts, including: 1. Classifying inventory as either merchandise or manufacturing and determining inventory quantities through physical counts and ownership rules. 2. Explaining the accounting for inventories using specific identification, first-in first-out (FIFO), and average costing methods. Under FIFO, the earliest goods purchased are assumed to be sold first, matching older historical costs with current revenues. 3. Illustrating inventory cost flow assumptions and calculations using examples, showing how beginning inventory plus purchases minus cost of goods sold equals ending inventory under different methods.

Uploaded by

Sophan Sopyan
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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You are on page 1/ 18

PENGANTAR AKUNTANSI 1

SESI – 12
INVENTORIES - 1

OLEH: MOLINA, SE., M.SI., AK., CA


CHAPTER

6 Inventories
LEARNING OBJECTIVES
After studying this chapter, you should be able to:

1. Discuss how to classify and determine inventory.


2. Explain the accounting for inventories and apply the inventory cost flow methods.

Source: Financial Accounting. IFRS 3rd Edition by Weygandt, Kimmel & Kieso
Classifying and Learning Objective 1
Discuss how to classify
Determining Inventory and determine inventory

Classifying Inventory
Merchandising Company Manufacturing Company

One Classification: Three Classifications:


 Inventory  Raw Materials
 Work in Process
• HELPFUL HINT  Finished Goods
Regardless of the classification, companies
report all inventories under Current Assets
on the statement of financial position.
Determining Inventory Quantities

Physical Inventory taken for two reasons:


Perpetual System
1. Check accuracy of inventory records.
2. Determine amount of inventory lost due to wasted raw materials, shoplifting, or
employee theft.

Periodic System
3. Determine the inventory on hand.
4. Determine the cost of goods sold for the period.

6-4
Determining Inventory Quantities

TAKING A PHYSICAL INVENTORY


Involves counting, weighing, or measuring each kind of inventory on hand.
Companies often “take inventory”
 when the business is closed or
business is slow.
 at the end of the accounting period.

6-5
Determining Inventory Quantities

DETERMINING OWNERSHIP OF GOODS


GOODS IN TRANSIT
 Purchased goods not yet received.

 Sold goods not yet delivered.

Goods in transit should be included in the inventory of the company that has
legal title to the goods. Legal title is determined by the terms of sale.

6-6
DETERMINING OWNERSHIP OF GOODS

GOODS IN TRANSIT

Ownership of the goods passes to the


buyer when the public carrier accepts the
goods from the seller.

Ownership of the goods remains with the


seller until the goods reach the buyer.

6-7
Determining Ownership of Goods

CONSIGNED GOODS
To hold the goods of other parties and try to sell the goods for them for a fee, but
without taking ownership of the goods.

6-8
Learning Objective 2
Classifying and Explain the accounting for
Determining Inventory inventories and apply the
inventory cost flow methods

Inventory is accounted for at cost.


 Cost includes all expenditures necessary
to acquire goods and place them in a condition ready for sale.
 Unit costs are applied to quantities to compute the total cost of the inventory and
the cost of goods sold using the following costing methods:
► Specific identification
► First-in, first-out (FIFO) Cost Flow
► Average-cost Assumptions
Inventory Costing

Illustration: Crivitz TV Company purchases three identical 50-inch TVs on different


dates at costs of £700, £750, and £800. During the year Crivitz sold two sets at
£1,200 each. These facts are summarized below.
Specific Identification

If Crivitz sold the TVs it purchased on February 3 and May 22, then its cost of goods
sold is £1,500 (£700 + £800), and its ending inventory is £750.
Specific Identification

Actual physical flow costing method in which items still in inventory are
specifically costed to arrive at the total cost of the ending inventory.

 Practice is relatively rare.

 Most companies make assumptions (cost flow


assumptions) about which units were sold.

6-12
Cost Flow Assumptions

There are two assumed cost flow methods:

1. First-in, first-out (FIFO)

2. Average-cost

Cost flow does not need be consistent with the physical movement of the
goods.
Cost Flow Assumptions

Data for Lin Electronics’ Astro condensers.

(Beginning Inventory + Purchases) - Ending Inventory = Cost of Goods Sold

6-14
Cost Flow Assumptions

FIRST-IN, FIRST-OUT (FIFO)


 Costs of the earliest goods purchased are the first to be recognized in
determining cost of goods sold.

 Often parallels actual physical flow of merchandise.

 Companies obtain the cost of the ending inventory by taking the unit cost of
the most recent purchase and working backward until all units of inventory
have been costed.

6-15
FIRST-IN, FIRST-OUT (FIFO)

6-16
FIRST-IN, FIRST-OUT (FIFO)

• HELPFUL HINT
Another way of thinking about the
calculation of FIFO ending inventory is the
LISH assumption—last in still here.

6-17
THANK YOU

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