CHAPTER 6: INVENTORIES

KẾ TOÁN HÀNG TỒN KHO TRONG DN

THƯƠNG MẠI
 CHAPTER OVERVIEW
INVENTORY BASICS

INVENTORY COSTING

INVENTORY VALUATION
 Inventory: Hàng tồn kho

INVENTORY
BASICS Inventory costs: Giá gốc hàng
tồn kho

Cost of goods sold: Giá vốn

hàng bán
 INVENTORY
HÀNG TỒN KHO

Merchandise inventory includes all goods that a

company owns and holds for sale, regardless of
where the goods are located when inventory is
counted.
Items requiring special attention include:
Goods
Goods in Goods on Damaged or
Transit Consignment Obsolete
Hàng đang đi Hàng bị hư hỏng
Hàng gửi bán
đường
 INVENTORY - GOODS IN TRANSIT
HÀNG ĐANG ĐI ĐƯỜNG
FOB Shipping Point
Public
Carrier

Seller Buyer

Ownership passes
to the buyer here.

Public
Carrier

Seller FOB Destination Point Buyer

 INVENTORY - GOODS ON CONSIGNMENT
HÀNG GỬI BÁN
Merchandise is included in the inventory of the
consignor, the owner of the inventory.
Thanks for selling my
inventory in your
store.
Consignee

Consignor
INVENTORY - GOODS DAMAGED OR OBSOLETE : HÀNG
LỖI HỎNG
Damaged or obsolete goods are not counted in
inventory if they cannot be sold.

Cost should be reduced to net realizable

value (Giá trị thuần có thể thực hiện) if they can be sold.
 INVENTORY COSTS
GIÁ GỐC HÀNG TỒN KHO
Include all expenditures necessary to bring an item to
a salable condition and location.
Invoice
Cost
Giá theo hóa Plus
đơn Insura
nce Plus
Plus Plus
Import
Freight Storage
Duties

Minus Discounts and

Allowances
COST OF An income statement figure
(Expenses) which reflects the
GOODS cost of producing finished
goods that are sold to
SOLD consumers.

GIÁ VỐN Determine COGS based on

inventory cost flow
HÀNG assumptions and inventory
BÁN system
GIÁ VỐN HÀNG BÁN
• Giá vốn hàng bán là giá trị phản ánh lượng hàng hóa đã bán được của một doanh nghiệp trong một
khoảng thời gian, nó phản ánh được mức tiêu thụ hàng hóa cũng như tham gia xác định được lợi
nhuận của DN trong một chu kỳ kinh doanh.
 INTERNAL CONTROLS AND TAKING A
PHYSICAL COUNT
Most companies take a Good internal controls over count include:
physical count of inventory 1.Pre-numbered inventory tickets.
2.Counters have no inventory responsibility.
at least once each year. 3.Counts confirm existence, amount, and
quality of inventory item.
4.Second count is taken.
When the physical count 5.Manager confirms all items counted.
does not match the
Merchandise Inventory
account, an adjustment
must be made.
 EXAMPLE

A master carver of wooden birds operates her business out of a garage. At the end of the

current period, the carver has 20 units (carvings) in her garage, 5 of which were damaged

by water and cannot be sold. She also has another 5 units in her truck, ready to deliver per

a customer order, terms FOB destination, and another 11 units out on consignment at retail

stores. How many units does she include in the business’s period-end inventory?
 EXAMPLE

A distributor of artistic iron-based fixtures acquires a piece for $1,000, terms FOB shipping

point. Additional costs in obtaining it and offering it for sale include $150 for

transportation-in, $300 for import duties, $100 for insurance during shipment, $200 for

advertising, a $50 voluntary gratuity to the delivery person, $75 for enhanced store

lighting, and $250 for sales staff salaries. For computing inventory, what cost is assigned to

this artistic piece?

 COSTING METHOD
CÁC PHƯƠNG PHÁP TÍNH GIÁ VỐN HÀNG BÁN

Accounting for Costing Method Phương pháp tính giá

inventory requires 1. Specific Identification Thực tế đích danh
several decisions . . . 2. FIFO nhập trước xuất trước
3. Weighted Average Giá bình quân gia quyền
Inventory System
 Perpetual or Periodic
 INVENTORIES RECORDING METHOD
HỆ THỐNG QUẢN LÝ HÀNG TỒN KHO
Perpetual Periodic
Phương pháp kê khai thường xuyên Phương pháp kiểm kê định kì
• Current and Continuous update for inventory
movements through the inventory a/c.
• Applied in manufacturers and merchandises
of high-value goods
• No permanent record of inventory through
the inventory A/C.
• Physical count needed to determine the
amount of inventory on hand at the end of
the accounting period.
• Theoretically, used in retailers
 Inventory Costing Illustration
Here is information about the mountain bike inventory of Trekking
for the month of August.
Date   Activity Units Acquired at Cost   Units Sold at Retail Unit Inv.
Aug. 1 Beg. Inventory 10units @ $ 91 = $ 910       10
Aug. 3 Purchased 15units @ $ 106 = $ 1,590       25
Aug. 14 Sales             20 units @ $130 5
Aug. 17 Purchased 20units @ $ 115 = $ 2,300       25
Aug. 28 Purchased 10units @ $ 119 = $ 1,190       35
Aug. 31 Sales             23 units @ $150 12
    Totals 55       $5,990   43    
                       
 1. SPECIFIC IDENTIFICATION
PHƯƠNG PHÁP TÍNH GIÁ ĐÍCH DANH
When units are sold, the specific cost of the units sold is
added to cost of goods sold.
Trekking sold 20 bikes on August 14th with the following costs:
8 bikes @ $ 91 = $ 728
12 bikes @ 106 = 1,272
Cost of goods sold = $ 2,000
The 23 bikes sold on August 31st had the following costs:
2 bikes @ $ 91 = $ 182
3 bikes @ 106 = 318
15 bikes @ 115 = 1,725
3 bikes @ 119 = 357
Cost of goods sold = $ 2,582
 SPECIFIC IDENTIFICATION

Income Statement
Cost of Goods Sold Balance Sheet
Inventory
 Specific Identification
Here are the entries to record the purchases and sales. The
numbers in red are determined by the cost flow assumption used.

All purchases
and sales are
made on
credit.
The selling
price of
inventory was
as follows:
8/14 $130
8/31 150
 2. FIRST-IN, FIRST-OUT (FIFO)
PHƯƠNG PHÁP NHẬP TRƯỚC XUẤT TRƯỚC

Oldest Cost of
Costs Goods Sold

Recent Ending
Costs Inventory
 First-in, First-out (FIFO)

The Cost of Goods Sold for the August 14 sale is $1,970.

After this sale, there are 5 units in inventory at $530 (5 @ $106)
 First-in, First-out (FIFO)

Cost of Goods Sold for August 31 = $2,600

On August 31st, there are 12 units in inventory at $1,420 (2 @ $115 + 10 @ $119).

 First-in, First-out (FIFO)
Here are the entries to record the purchases and sales entries. The
numbers in red are determined by the cost flow assumption used.

All purchases
and sales are
made on
credit.
The selling
price of
inventory was
as follows:
8/14 $130
8/31 150
 4. Weighted Average
phương pháp tính giá bình quân
When a unit is sold, the average cost
of each unit in inventory is assigned
to cost of goods sold.
Cost of Goods Units on hand
Available for ÷ on the date of
Sale sale
 Weighted Average

First, we need to compute the weighted

average cost per unit of items in inventory.

÷
 Weighted Average

The Cost of Goods Sold for the August 14th sale is $2,000.
After this sale, there are 5 units in inventory at $500.
Weighted Average

÷
 Weighted Average

Cost of Goods Sold for August 31 = $2,622

After the August 31 sale, there are 12 units in inventory at $1,368: (12 @ $114)
 Weighted Average
Here are the entries to record the purchases and sales entries for Trekking.
The numbers in red are determined by the cost flow assumption used.

All purchases
and sales are
made on
credit.
The selling
price of
inventory was
as follows:
8/14 $130
8/31 150
 Financial statement effects
of costing methods
Because prices change, inventory methods nearly always
assign different cost amounts.
ADVANTAGES OF COSTING METHOD

Weighted Specific
FIFO
Adverage Cost Identification
• Inventory of BS • smooths out • matches the
approximates erratic changes costs of items
its current cost in costs with the
• It follows the revenues they
actual flows of generate
goods
Additional tracking data for specific identification: (1) January 15 sale—200 units @ $14, (2) April 1 sale—
200 units @ $15, and (3) November 1 sale—200 units @ $14 and 100 units @ $20

1. Compute the cost of goods available for sale.

2. Apply the methods of inventory costing (FIFO, weighted average and specific identification) to compute

ending inventory and cost of goods sold under Perpetual system

INVENTOTY VALUATION
AND THE EFFECTS OF
INVENTORY ERRORS
LOWER OF COST
AND • Merchandise inventory is reported on
NET RELIAZABLE statement of financial position at the lower of
Cost and Net realizable value
VALUE
Computing Net Realizable Value (NRV)

Net relizable value (NRV) is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the sale.

Example: A retailer came out with the Iphone 10 in 2019 (Cost of each item is $250). But the Iphone
didn’t sell well, estimated selling price is $230 and packing cost is $10. Calculate NRV of this Inventory?
Inventory writedown
Cost < NRV Measure inventory at cost

Cost > NRV Measure inventory at NRV with recognition of the decrease in inventory value

Inventory shall be measured at lower of cost and NRV to each individual item seperately
Example of inventory of a motorsports retailer
Recording the Lower of Cost and NRV
 FINANCIAL
STATEMENT An inventory error cause misstatements in
COGS, Gross Profit, Net profit, Current
EFECTS OF assets, Equity and the next period’s
statements.
INVENTORY
ERRORS
Income Statement Effects
Balance Sheet Effects
Inventory Error Example
Consider an inventory error for a company with $100,000 in sales for each of Year 1, Year 2, and Year 3.
If this company has a steady $20,000 inventory level and makes $60,000 in purchases in each year, its
cost of goods sold is $60,000, its gross profit is $40,000 and expenses of each year is $10,000. It also
maintained a $20,000 physical inventory from the beginning to the end of that three-year period.

Assume the company makes an error in computing its Year 1 ending inventory and reports $16,000
instead of the correct amount of $20,000.
 Effects of Inventory Errors on
Three Period’s Income Statements
EXERCISES
1. A company had $10,000 of sales, and purchased merchandise costing $7,000 in each of Year
1, Year 2, and Year 3. It also maintained a $2,000 physical inventory from the beginning to the
end of that three-year period. In accounting for inventory, it made an error at the end of Year 1
that caused its Year 1 ending inventory to appear on its statements as $1,600 rather than the
correct $2,000.

(a) Determine the correct amount of the company’s gross profit in each of Year 1, Year 2, and
Year 3.

(b) Prepare comparative income statements to show the effect of this error on the company’s
cost of goods sold and gross profit for each of Year 1, Year 2, and Year 3
 2. Craig Company buys and sells one product. Its beginning inventory, purchases, and sales during calendar- year 2021 follow.

Additional tracking data for specific identification: (1) January 15 sale—200 units @ $14, (2) April 1 sale—200 units @ $15,
and (3) November 1 sale—200 units @ $14 and 100 units @ $20.

Required
1.Compute the cost of goods available for sale. Apply the 3 methods of inventory costing (FIFO, weighted average, and specific
identification) to compute ending inventory and cost of goods sold under each method using the perpetual system.
2.Compute gross profit earned by the company for each of the 3 costing methods. Also, report the inventory amount reported on the
balance sheet for each of the 3 methods.
3. The financial officer was computed cost of goods sold according to Weighted average instead of FIFO. Determine the impact on
year 2021’s income from the error. Also determine the effect of this error on year 2022’s income. Assume no income taxes.