MUHASEBE I - Deneme Sınavı - 14

Specific Identification Method is an inventory costing method based on the specific cost of particular units of inventory.

Inventories can can simply be defined as asset items that a company holds for sale in the ordinary course of business, or items that will be used or consumed in the production of goods to be sold.

Raw Materials Inventory reports the cost of goods and materials on hand which will be used in production.

Work in Process Inventory reports the cost of goods, materials and other components of manufacturing process used for the inventory which are still in production process, in other words unfinished at the time financial statements are prepared.

Finished Goods Inventory reports the cost of goods, materials and other components of manufacturing process used for the inventory produced and available for sale.

The consistency principle holds that companies should use the same accounting methods and procedures in each accounting period, so that the information provided will help investors and creditors to compare a company’s financial statements from one period to the next.

The disclosure principle holds that a company should report enough information for financial statement users to understand methods and procedures used for each component of the financial statements to make wise decisions about the company by providing additional information.

The materiality concept states that a company must perform strictly proper accounting only for significant items.

Conservatism in accounting means being careful in reporting items in the financial statements.

Perpetual Inventory System is a system of tracking and recording inventory and costs of goods sold on a continual basis, so current inventory balance can be calculated on real time basis, and the accounting system can display the current inventory balance at any point in time.

Periodic Inventory System is an inventory system which relies upon physical count of the inventory to determine the ending inventory balance and cost of goods sold.

Raw Materials Inventory reports the cost of goods and materials on hand which will be used in production.

Work in Process Inventory reports the cost of goods, materials and other components of manufacturing process used for the inventory which are still in production process, in other words unfinished at the time financial statements are prepared.

Finished Goods Inventory reports the cost of goods, materials and other components of manufacturing process used for the inventory produced and available for sale.

The consistency principle holds that companies should use the same accounting methods and procedures in each accounting period, so that the information provided will help investors and creditors to compare a company’s financial statements from one period to the next.

A business’s financial statements must report enough information for outsiders to make knowledgeable decisions about the company because of the disclosure principle rules.

A company must perform strictly proper accounting only for items that are significant to the business’s financial situation according to the materiality concept requirements.

There are two basic inventory accounting systems: “Perpetual Inventory System” and “Periodic Inventory System”.

The specific identification method uses the specific cost of each inventory unit to determine ending
inventory and cost of goods sold.

First-In, First-Out (FIFO) Method is an inventory costing method in which the first costs into inventory are the first costs out to cost of goods
sold. Ending inventory is based on the costs of the most recent purchases.