There are two basic issues involved in inventory accounting:
1. Determine the cost of goods available for sale: Beginning Inventory + Purchases.
2. Allocate the cost of total inventory costs (cost of goods available for sale) between two components: COGS on the income statement and the ending inventory on the balance sheet. Note that COGS = (Beginning Inventory + Purchases) - Ending Inventory. The cost flow assumption to be adopted includes specific identification, average cost, FIFO, LIFO, etc. This issue will be discussed in subsequent subjects.
Determination of Inventory Cost
IFRS and SFAS No. 151 provide similar treatment of the determination of inventory costs.
The cost of inventories, capitalized inventory costs, includes all costs incurred in bringing the inventories to their present location and condition.
| choas69: i thought cost flow assumption includes LIFO FIFO and WAC, but specific identification matches costs with the actual physical flow of goods.|
please i need someone to clarify this to me.