Inventories and Cost of Goods Sold


  1. Introduction to inventory and cost of goods sold:
    1. Inventory is merchandise purchased by merchandisers (retailers, wholesalers, distributors) for the purpose of being sold to customers. The cost of the merchandise purchased but not yet sold is reported in the account Inventory or Merchandise Inventory

      1. Inventory is reported as a current asset on the company's balance sheet. Inventory is a significant asset that needs to be monitored closely. Too much inventory can result in cash flow problems, additional expenses (e.g., storage, insurance), and losses if the items become obsolete. Too little inventory can result in lost sales and lost customers.
        1. Cost of goods sold:
          Main types of C G S is
          1:LIFO(Last in first out)
          2:FIFO(First in first out)
          3: Average

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