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Running head: FINANCIAL ACCOUNTING

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Financial Accounting
Author
Author Affiliation

FINANCIAL ACCOUNTING

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Financial Accounting
What inventory accounting method do you use and why (FIFO, LIFO, or Weighted-Average)?
What are its advantages and disadvantages?
Since widgets area unit most likely not high greenback things that I will possibly sell
them at high volumes over any given amount of your time, i might contemplate First-In First-Out
because the accountancy technique that i might use. This could be a straightforward system that I
could utilize to easily charge the primary things purchased to the price of products sold. No
matter that one I really sold first. The advantage of first in first out system is that it's
straightforward and simple to stay records (Elliott, 2017). The first in first out inventory
technique can facilitate American state to keep up a reasonably robust record that may be
looking spectacular to potential investors. The disadvantage here is that the worth of my
company’s inventory is going to be a lot of higher as compared to a LIFO strategy. I additionally
can have to be compelled to take care of higher tax liabilities because of the upper perceived
profits.
What activities should you perform to correctly account for your inventory at year-end?
First, to properly account for inventory at the tip of a year, i have to perform a full
physical inventory of all the things that I even have in inventory. Once I even have accounted for
any lost inventory, I will then prepare the correct money statements. i would like to trace all
sales, value of products sold-out, gross margins additionally because the ending inventory are
going to be calculated and according on the statement. This can account for the complete
inventory that was purchased, sold-out and lost throughout the year.
Why is it important to track inventory? What does this information tell you about your business?

FINANCIAL ACCOUNTING

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There are units several reasons on behalf of me to stay track of my inventory. Since, I’m in
total commitment to sell my business to investors, i would like to make sure that my inventory
ledgers area unit pristine thus, guaranteeing that my money statements area unit correct. Because,
my money statements can mirror my company’s achieve potential investors. Also, if my records
don't seem to be correct I might believe that my company is doing well, whereas actually will be
floundering. Which, as we all know are going to be harmful to goal of ultimately commercialism
the business. Another necessary facet of accurately chase inventory is that it'll show American
state if i would like to seem into measures which will forestall worker thievery also as thievery
(Richardson, 2017).5-1A
a) LIFO
b) Weighted average
c) FIFO
d) LIFO
e) FIFO
5-2A
a) Since initial out FIFO inventory accounting assigns the price of inventory to the oldest
merchandise that square measure purchased first. The price of products sold would be equal the
oldest item purchased $1,060. Attributable to this, the price of the foremost recent things square
measure left in ending inventory. Thereupon in mind the Ending Inventory would be adequate
the price of the foremost recent item purchased. $1,380
b) For inventory accounting it might be the alternative, the price of products sold would be
$1,380 and therefore the Ending Inventory would be $1,060

FINANCIAL ACCOUNTING

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c) Weighted Average Cost= (Cost of 1st purchase + cost of second purchase)/ (Units in 1st
purchase+units in second purchase)
= ($1,060+$1,380)/(1+1)
=$1,220
d) Because just one item was sold the price of products sold would equal the weighted monetary
value of $1,220. An equivalent would be true for the Ending Inventory it might equal the
weighted monetary value $1,220.5-3A
Cortez Company Inventory Transactions
Unit

Total

Cost

Cost

100

60

$6,000

First purchase

150

68

$10,200

Second Purchase

200

72

$14,400

Sales

-270

Ending Inventory

180

Quantity

Beginning
Inventory

a)
Cost of Goods Sold - FIFO
Unit

Total

Cost

Cost

60

$6,000

Quantity

Beginning
100
Inventory

FINANCIAL ACCOUNTING

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First purchase

150

68

$10,200

Second Purchase

20

72

$1,440

Cost of Goods
...