The document discusses key concepts related to inventory accounting including: 1) It defines merchandise inventory as goods owned by a business that are held for sale to customers. 2) It explains the difference between perpetual and periodic inventory systems, with perpetual updating inventory records continuously and periodic conducting a physical count annually. 3) It outlines different inventory costing methods including FIFO, LIFO, and average cost.

2. Group
Member
Hamza
Kabisha
Mehmoona
Zareen

3.  Merchandise
inventory is the
goods owned by the
business
organization which
are held for sale to
the consumers
 Goods held for sale
to customers

4.  Understanding and journalizing transactions
using the perpetual and periodic inventory
system and explaining the difference between
perpetual and periodic inventory systems
 Use the gross profit percentage and inventory
turnover to evaluate a business
 Estimate inventory by the gross profit method

5. Merchandise inventory Merchandise inventory
cash accounts payable
To record purchased of
Goods with cash To record purchased of
goods on account

6. cash accounts payable
merchandise inventory merchandise inventory
to record purchases return to record purchases return

7.  It is an term that indicates when the
ownership of Merchandise/Goods is
transfer from the seller to the buyer.
 FOB Shipping Point
 FOB Destination

8.  Buyer of the  Seller of the
Merchandise/ Merchandise/
Goods Pays the Goods pays the
transportation transportation
cost.
cost.
 The cost is
 The cost is added recorded as a
in merchandise “Delivery
inventory. Expense/Cost”
separately.

9. Inventory
Accounting
Method
Perpetual Periodic/
Method Physical
Method

10.  A system that maintain a running record to
show the inventory on hand at all time.
 Merchandise inventory and cost of
merchandise sold accounts are updated
on continuous basis.
 Inventory counted at least once a year.
 Used for all types of goods.

11.  FIFO(First-In First-Out) Method
 LIFO(Last-In-First-Out) Method
 Average Cost Method

12.  Using FIFO cost are included in the
merchandise sold in the order in which
they are incurred.
60 units
Less units sold 40
Ending inventory 20 units
20 units × $18 per unit = $360

13. DATE PURCHASE SELLING BALANCE
Unit Price/ Total Unit Price/ Total Unit Price/ Total
unit unit unit
January 1st 600 4500 2700000
January 10th 200 4700 940000 600 4500 2700000
200 4700 940000
January 15th 400 4500 1800000 200 4500 900000
200 4700 940000
January 28th 200 4500 900000 - - -
100 4700 940000 100 4700 470000

14.  Using LIFO the cost of units sold is the
cost of the most recent purchases.
60 units
Less units sold 40
Ending inventory 20 units
10 units × 10 = $100
10 units × 14 = 140
Total $240

15. DATE PURCHASE SELLING BALANCE
Unit Price/ Total Unit Price/ Total Unit Price/ Total
unit unit unit
January 1st 600 4500 2700000
January 10th 200 4700 940000 200 4700 940000
600 4500 2700000
January 15th 200 4700 940000 400 4500 180000
200 4500 2700000 100 4500 450000
January 28th 300 4500 1350000 - - -

16. Cost of Goods Available
Average Cost
=
per unit
Number of units available
 Usually falls between FIFO & LIFO
amounts
 An average unit cost for each type
of item is computed each time
when a purchase is made

17. DATE PURCHASE SELLING BALANCE
Unit Price/ Total Unit Price/ Total Unit Price/ Total
unit unit unit
January 1st 600 4500 2700000
January 10th 200 4700 940000 800 4550 3640000
January 15th 400 4550 1820000 400 4550 1820000
January 28th 300 4550 1365000 - - -

18. LIFO
31% FIFO
46%
Average Other
20% 3%

19.  A system that do not keep a
continuous records of inventory on
hand all the time.
 Merchandise inventory and cost of
merchandise sold accounts are
usually updated at the end of year.
 Inventory counted at least once a
year.
 Used for inexpensive goods.

20.  Merchandise Inventory  Purchases
 Cash Or A/P  Cash Or A/P
 Sales Return &  Sales Return &
Allowance Allowance
 Sales Discount  Sales Discount
 Cost Of Merchandise  Cost Of
Sold Merchandise Sold

21.  Purchase
Merchandise inventory Purchases
of Goods
Cash or A/P Cash or A/P
Cash or A/P  Return of Cash or A/P
Purchase
Merchandise inventory Purchase Return

22. Accounts Payable  Payment
Of Accounts Payable
Cash Accounts
Payable Cash
Cash Cash
 Collection
Accounts Receivable Of A/R
Accounts
Receivable
Accounts Payable A/P
 Payment
Cash Of Cash
Accounts
Merchandise Payable Purchase Discount
Inventory On
Discount

23. Cash  Collection Cash
Sales Discount Of Sales Discount
Accounts A/R
Account Receivable Receivabl
e On
Discount CMS
(B) Merchandise Inventory
CMS  Year End Purchase
Merchandise Inventory Adjusting (C) Merchandise Inventory
Entries CMS
In Case Of Shrinkage Merchandise Inventory(B)
Inventory +Purchases
-Cost Of Merchandise
Available For Sale
-Merchandise Inventory(C)
-Cost Of Merchandise Sold

24.  Gross profit method is a way to estimate
inventory based on the cost of goods
sold model.
 Also called gross margin method.

25. Cost of goods sold:
Beginning inventory $1,000
+ Purchases 6,000
= Goods available 7,000
- Cost of goods sold (5,000)
= Ending inventory $2,000

26. Beginning inventory $14,000
Purchases 66,000
Goods available 80,000
Cost of goods sold:
Net sales revenue $100,000
Less estimated
gross profit 43% (43,000)
Estimated cost of goods sold 57,000
Estimated cost of ending inventory $23,000