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However, a car dealer will have a low turnover due to the item being a slow moving item. As such only intra-industry comparison will be appropriate. Even within industry, inventory turns can vary across firms for various reasons, such as the amount of product variety, the extent of price discounts offered, and the structure of the supply chain.
In accounting, adjusting entries are journal entries usually made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred. The revenue recognition principle is the basis of making adjusting entries that pertain to unearned and accrued revenues under accrual-basis accounting .
To record sales, the perpetual system requires an extra entry to debit the Cost of goods sold and credit Merchandise Inventory. By recording the cost of goods sold for each sale, the perpetual inventory system alleviated the need for adjusting entries and calculation of the goods sold at the end of a financial period, both of which the periodic ...
In double-entry bookkeeping, a sale of merchandise is recorded in the general journal as a debit to cash or accounts receivable and a credit to the sales account. [3] The amount recorded is the actual monetary value of the transaction, not the list price of the merchandise. A discount from list price might be noted if it applies to the sale.
Folio Number: Every page of a journal is numbered. This number is known as a folio number. [5] The folio number is used as a cross reference between the journal and the ledger accounts. The use of folio numbers makes it easy to refer back from the ledger account to the journal entry or forward from the journal entry to the ledger account.
The difference between the cost of an inventory calculated under the FIFO and LIFO methods is called the LIFO reserve (in the example above, it is $750, i.e. $5250 - $4500). This reserve, a form of contra account , is essentially the amount by which an entity's taxable income has been deferred by using the LIFO method.
Inventory may also cause significant tax expenses, depending on particular countries' laws regarding depreciation of inventory, as in Thor Power Tool Company v. Commissioner. Inventory appears as a current asset on an organization's balance sheet because the organization can, in principle, turn it into cash by selling it. Some organizations ...
A supply chain responsiveness matrix is a tool that is used to analyze inventory and lead time within an organization. The matrix is one of a number of value stream mapping tools. [1] The matrix is represented by showing lead time along the x-axis and inventory along the y-axis. The result shows where slow moving stock resides.