Inventory and Cost of Goods Sold (Flashcards)

This inventory valuation rule is usually associated with the accounting concept of conservatism. It is relevant when the value of inventory items are less than the actual cost to purchase or produce.

The amount of inventory determined without a physical count of the items on hand.

This cost flow assumption removes from inventory the oldest cost first and includes them in the cost of goods sold. As a result, the most recent costs remain in inventory.

This cost flow assumption removes from inventory the most recent costs first and includes them in the cost of goods sold. As a result, the older costs remain in inventory.

When this cost flow assumption is used, the unit cost of the inventory and the unit cost of the goods sold will be the same. The calculation of the unit cost is goods available total costs for the year divided by the total goods available units for the year.

This cost flow assumption means that a new average cost must be computed after each purchase. This new unit cost is then used until the next purchase of goods occurs.

Under this inventory system the inventory account will have no entries until a physical inventory occurs at the end of the accounting year.

When this inventory system is used the inventory account will be debited when goods are purchased, and it will be credited when goods are sold. It will also mean that the account Cost of Goods Sold will be debited.

With this cost flow assumption the oldest costs in the ending inventory are determined after the year has ended.

Under this cost flow assumption the most recent cost at the time of each sale is credited to Inventory and debited to the Cost of Goods Sold.

This refers to the order in which costs will be removed from inventory and reported as the cost of goods sold. (This is independent of the physical flow of the goods.)

This method for removing costs from inventory is used when the unit costs are very significant.

This term is associated with inventory items that have become outdated. This is one of the costs of holding inventory.

This term means that a reported amount is greater than the correct amount.

This term means that a reported amount is less than the correct amount.

This current asset includes raw materials, work-in-process, finished goods, and packaging materials.

Conversion costs are applied to this component of a manufacturer’s product cost.

This inventory category reports a manufacturer’s cost of products that have been started but not completed.

This inventory category reports a manufacturer’s cost of products that have been completed and are in the warehouse ready for sale.

This accounting concept directs an accountant to reduce the cost of an item in inventory to its net realizable value when it is lower than cost.

This term is defined as the selling price in the ordinary course of business minus the costs of completion, disposal, and transportation.

A common technique for estimating the cost of a company’s ending inventory.

A common technique used to estimate the cost of a retailer’s ending inventory.

This term describes the actual counting of the goods on hand (as opposed to relying on the quantity shown in the computer records).

This ratio is the result of dividing 1) the cost of goods sold for a year by 2) the average cost in inventory during the year.

This is the result of dividing 360 or 365 days by the inventory turnover ratio.

When this term appears on an invoice it indicates that ownership of the goods will pass from the seller to the buyer when the goods reach the buyer’s location.

When this term appears on an invoice it indicates that ownership of the goods will pass to the buyer when the goods leave the seller’s warehouse.

This phrase indicates that items have been shipped by the seller but have not yet reached the buyer. (The ownership of these items depends on the terms of the sale.)

This term refers to the transportation costs paid by the buyer for products that were purchased with terms FOB shipping point. These costs are part of the cost of the goods.

The duration of time between 1) the date when goods are ordered, and 2) the date when the goods are received.

This includes all costs that are necessary to get a product into inventory. A retailer’s payment of freight-in is an example.

These are the inventoriable costs and include a product’s direct materials, direct labor, and manufacturing overhead.

This accounting system uses predetermined unit costs for materials, labor and overhead in order to identify inefficiencies.

This type of manufacturing accounting excludes fixed manufacturing overhead from the inventory and cost of goods sold. It is not acceptable for external financial reporting or for income tax reporting in the U.S.

This type of manufacturing accounting allocates fixed manufacturing overhead to the goods produced (along with the variable product costs). This method is required by US GAAP and U.S. income taxes.

This is calculated by subtracting the cost of goods sold from net sales.