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

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

Financial Accounting

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

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Multiple Choice

Which inventory cost flow assumption generally best matches the physical flow of inventory in most businesses?

First-In, First-Out (FIFO)

Weighted Average Cost

Specific Identification

Last-In, First-Out (LIFO)

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Verified step by step guidance

Understand the concept of inventory cost flow assumptions: These are methods used to allocate costs to inventory and cost of goods sold. They do not necessarily reflect the actual physical movement of goods but are accounting methods to value inventory.

Review the First-In, First-Out (FIFO) method: FIFO assumes that the oldest inventory items (first purchased) are sold first. This often aligns with the physical flow of inventory in businesses where older items are sold before newer ones, such as perishable goods or items with expiration dates.

Examine the Weighted Average Cost method: This method calculates the cost of inventory based on the average cost of all items available for sale during the period. It does not directly match the physical flow of inventory but provides a simplified approach to cost allocation.

Understand the Specific Identification method: This method tracks the actual cost of each individual item in inventory. It is typically used for unique or high-value items, such as cars or jewelry, where the physical flow can be directly identified.

Review the Last-In, First-Out (LIFO) method: LIFO assumes that the most recently purchased inventory items are sold first. This method is less likely to match the physical flow of inventory in most businesses, as older items are usually sold first in practice.