Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

The Financial Statements

Financial Accounting

1. Introduction to Accounting

The Financial Statements

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Multiple Choice

Inventory is reported in the financial statements at:

market value on the balance sheet date

the lower of cost or net realizable value

historical selling price

replacement cost

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Verified step by step guidance

Understand the concept of inventory valuation: Inventory is reported in the financial statements at the lower of cost or net realizable value (NRV). This principle ensures that inventory is not overstated in value, adhering to the conservatism principle in accounting.

Define 'cost': Cost refers to the purchase price of the inventory, including any additional costs incurred to bring the inventory to its current condition and location for sale.

Define 'net realizable value (NRV)': NRV is the estimated selling price of the inventory in the ordinary course of business, minus any costs of completion and costs necessary to make the sale.

Compare cost and NRV: For each inventory item, compare its cost to its NRV. If the NRV is lower than the cost, the inventory should be reported at NRV. If the cost is lower, the inventory should be reported at cost.

Apply the lower of cost or NRV rule: Adjust the inventory value on the financial statements to reflect the lower of the two values for each item. This ensures compliance with accounting standards and provides a realistic valuation of inventory.