Accounting for Inventory and Supplies | California State University, Northridge - Edubirdie

University:
California State University, Northridge
Course:
ACCT 220 | Introduction to Financial Accounting
Academic year:

2024
Views:

128

Pages:

1
Author:

groeraqe1

ACCOUNTING FOR INVENTORY AND SUPPLIES USING THE PERIODIC SYSTEM The following are the Journal entries that would follow the Periodic Inventory example in Module 4 slide 19. A key point is that the Purchases and Returns account is ONLY required for a Periodic system. In a Perpetual system all entries are made directly to the Inventory account. The accounting is similar for Office Supplies. 1. At the beginning of the month there is a beginning balance in the Inventory account: Inventory $2500 (Beg) 2. Date During the month the company has made one purchase of Inventory: Number Account Purchases Cash or Accounts Payable Debit $ 800 Credit Debit $ 250 Credit $ 800 3. During the month the company had to return some Inventory: Date Number Account Cash or Accounts Payable Returns $ 250 4. At the end of the month the company performed a physical count to determine the value of Inventory and how much to post as Cost of Goods Sold. Date Number Account Inventory [posts the new Beginning balance] Returns [zero’s out this account] Cost of Goods Sold [an Expense account] Purchases [zero’s out this account] Inventory [zero’s out the old Beginning balance] Debit $ 1500 $ 250 $ 1550 Credit $ 800 $2500 Notice that the Returns and Purchases accounts are zeroed out (just like Revenues and Expenses) so you start the new accounting period with zero balances. Also the original Beginning balance is remove with an accounting entry and replaced with the new physical count with an accounting entry.

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