Periodic Inventory - FIFO, LIFO, and Average Cost definitions Flashcards
Periodic Inventory - FIFO, LIFO, and Average Cost definitions
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Periodic Inventory System Inventory and cost of goods sold are updated only at the end of the period, not after each transaction. FIFO Costing method where the oldest inventory costs are assigned to cost of goods sold, reflecting earlier purchase prices. LIFO Costing method where the most recent inventory costs are assigned to cost of goods sold, reflecting latest purchase prices. Average Cost Method Costing method using the weighted average of all units' costs to determine cost of goods sold and ending inventory. Cost Flow Assumption Accounting approach for assigning costs to inventory and cost of goods sold, independent of the actual movement of goods. Cost of Goods Sold Total cost assigned to inventory items that have been sold during the period, reducing inventory value. Ending Inventory Value of unsold goods physically counted and reported at the end of the accounting period. Goods Available for Sale Sum of beginning inventory and purchases, representing all inventory that could be sold during the period. Beginning Inventory Inventory value carried over from the previous period, forming the starting point for current period calculations. Purchases Inventory items acquired during the period, added to beginning inventory to determine goods available for sale. Physical Flow of Goods Actual movement of inventory items, which may differ from the cost flow assumption used in accounting records. Cost per Unit Average amount paid for each inventory item, calculated by dividing total cost by total units purchased. Inventory Count Physical process of tallying remaining inventory items at the end of the period to determine ending inventory. Identical Units Inventory items that are indistinguishable from each other, making cost assignment dependent on accounting methods. Financial Records Documentation and reports tracking inventory values, purchases, and cost of goods sold for accounting purposes.