Describe Change in Inventory Method and Inventory Errors.

Q: Why is it important to obtain shipping and receiving cutoff information during the inventory…

A: Cut-off Procedures:   The audit procedures applied to separate the transactions from one period to…

Q: Describe the alternative approaches for recording inventory write-downs.

A: Inventory write-down: As per GAAP (Generally Accepted Accounting Principles), the companies are…

Q: the difference between periodic inventory and perpetual inventory.

A: Inventory system of book keeping means where proper books of account relating to inventory has been…

Q: How do we record and report inventory shrinkage? Which accounts are affected?

A: Inventory Shrinkage:-When inventory has become less than the actual inventory recorded is known as…

Q: Is an adjusting entry needed for inventory shrinkage when using the periodic inventory system?…

A: Definition:

Q: Indicate the effects of inventory errors on the financial statements

A: Solution- 1-A merchandising company must be sure that it has properly valued its ending inventory.…

Q: What is inventory shrinkage? Describe the adjusting entry that would be recorded to account for…

A: Inventory shrinkage: When there is a difference between inventory as per books and actual inventory…

Q: Describe the types of errors in inventory.

A:

Q: Define inventory shrinkage.

A:

Q: What is the main distinction between perpetual and periodic inventory systems? Which type of system…

A: Explain the main distinction between perpetual inventory system and periodic inventory system and to…

Q: characteristics of a periodic inventory system, except

A: Characteristics of a periodic inventory system, except (C) INVENTORY RECORD IS ALWAYS UP TO DATE.

Q: Explain the appropriate accounting treatment required when a change in inventory method is made.

A: Definition:   Change in inventory method: Change in inventory method is said to be the difference…

Q: What are the key factors that can lead to an under/overstatement of the inventory balance?

A: Answer: Inventory balances are sometimes overstated and sometimes understated.

Q: Which of the following would cause periodic ending inventory to be overstated?

A: Note - the answer has been provided on the basis of information available in question. If any…

Q: Explain the audit for inventory

A: Directional testing is been used to audit the procedures  of statement of financial position items.

Q: Highlight the differences in the closing process when using the periodic inventory system rather…

A: Definition:

Q: what is the amount allocated to ending inventory on a LIFO basis?

A: Using the LIFO method, the last purchased units are sold first. Periodic inventory records inventory…

Q: What are the reasons for making an estimate of the value of ending inventory?

A: Inventory- It is the amount of those units which is not sold yet by the entity or the units which…

Q: Describe the effects of misstatement of ending inventory.

A:

Q: Define the term inventory shrinkage. How is the amount of inventory shrinkage determined in a…

A: Inventory Shrinkage refers to that amount of inventory which is in excess and listed in the…

Q: what are the effects of inventory errors on the financial statements

A: Incorrect recording of Inventory balance results in the Inventory errors.

Q: How does an inventory error effect the financial statements?

A: Inventory error:   Inventory errors are sometimes caused by making mistake in physical count, in…

Q: Describe the typical approach for recording inventory write-downs.

A: Inventory write-down: As per GAAP (Generally Accepted Accounting Principles), the companies need to…

Q: Explain briefly the application of the LCM rule to ending inventory. Describe its effect on the…

A:

Q: What is the purpose of disclosing the difference between the reported LIFO inventory amounts and…

A: Perpetual and periodic inventory system: In merchandise business, there are two types of inventory…

Q: Describe the accounting treatment for a change in inventory method other than to LIFO.

A: Method of Inventory: Inventory refers to the current assets that a company expects to sell during…

Q: What are the main differences between periodic inventory system and perpetual inventory system?

A: Periodic inventory system and Perpetual inventory systems are two systems used for the inventory…

Q: List and explain the substantive tests of Inventory and give example.

A: Substantive procedures are exercised by an auditor to detect material misstatements at the financial…

Q: How does analyzing inventory errors is helpful?

A: Accounting is primarily concerned with identifying, recording, measuring, summarizing transactions…

Q: company will be affected by the changes in inventory method

A: Inventory method is a retail accounting method used to estimate the value of a store’s merchandise.…

Q: Describe the inventory recording methods.

A: Inventory recording methods are two types:   Periodic inventory system Perpetual inventory system

Q: Explain the retail inventory method of estimating ending inventory.

A: Retail inventory method takes into account all the retail amounts that is, the current selling…

Q: Explain how to report and analyze inventory.

A: Merchandise Inventory: Merchandise is the stock of goods bought by a wholesaler, or a retailer, or a…

Q: Explain the following statement: “Inventory errors correct themselves.”

A: Solution: Introduction: Inventory means goods are available for sale and raw materials used in the…

Q: When does an inventory error cancel out, and why?

A:

Q: What are the origins and fundamental concepts underlying inventory problems? what are they explain…

A: Introduction:- Inventory management is a way of buying, keeping, and selling inventories – both raw…

Q: What can be the effect of inventory errors on the financial reports? How can these errors be…

A: Inventory is the detailed list of items that are present on hand. It constitute of all the finished…

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.