Understanding Merchandise Inventory in Financial Accounting

School: Kean University - Course: ACCT 2200 - Subject: Accounting

ACC2200 Principles of Accounting I Fall 2022 Instructor:Kunsu Park, Ph.D. Office: B-418/CBPM bldg. Phone:138 5773 6924 (cell) E-mail:[email protected](main email) & [email protected](alternative email) Office Hours:Monday/Wednesday/Thursday 3:00 p.m.-5:00 p.m. or by appointment

2Brief Review of Ch. 5 1.Describe merchandising operations and the two types of merchandise inventory systems 2.Account for the purchase of merchandise inventory using a perpetual inventory system 3.Account for the sale of merchandise inventory using a perpetual inventory system 4.Adjust and close the accounts of a merchandising business 5.Prepare a merchandiser's financial statements 6.Use the gross profit percentage to evaluate business performance

3Merchandise Inventory Chapter 6

4Chapter 6 Merchandise Inventory Learning Objectives After studying this chapter, you should be able to: 1.Identify accounting principles and controls related to merchandise inventory 2.Account for merchandise inventory costs under a perpetual inventory system 3.Compare the effects on the financial statements when using the different inventory costing methods 4.Apply the lower-of-cost-or-market rule to merchandise inventory 5.Measure the effects of merchandise inventory errors on the financial statements 6.Use inventory turnover and days' sales in inventory to evaluate business performance 7.Account for merchandise inventory costs under a periodic inventory system (Appendix 6A) 8.Estimate the cost of ending merchandise inventory using the gross profit method and the retail method (Appendix 6B)

6Learning Objective 1 1.Identify accounting principles and controls related to merchandise inventory

7Consistency Principle • A change in the accounting methods, mustbe reported to the investors and creditors in the Notes to the Financial Statements • Businesses should use the same accounting methods and procedures from period to period • Consistencyhelps users of financial statement information to comparefinancial statements from one period to the next