Asked in Business PlansBusiness Accounting and BookkeepingMarket Research
Business Accounting and Bookkeeping
Cost of marketing and delivering a product are included in inventory valuation?
January 17, 2008 11:37AM
Typically no. These costs are usually considered current period expenses and not added to inventory. However, there are certain situations where marketing costs might be deferred over a period of time, creating a prepaid expense.
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Asked in Stock Market
If the cost of an item of inventory is 60 the current replacement cost is 65 and the selling price is 95 the amount included in inventory according to the lower of cost or market concept is?
Inventory is generally carried on the balance sheet at its historical cost to the firm. This represents the most accurate value since it was an amount actually paid by the firm, not an estimate. If the market value changes upwards, the balance sheet value is not changed since accounting principles generally favor the more conservative (lower) value. If however the market value of inventory decreases (through obsolescence for example), then the inventory value is adjusted downward to accurately reflect this and ensure the value is not materially overstated on the firm's balance sheet. The retail price is never used for inventory valuation. The retail price will be used only for the income statement. So, using your example, the amount included in inventory would be 60.
Asked in Business Accounting and Bookkeeping
Should inventory be included in income statement?
Inventory is capitalized on the balance sheet as a current asset. Inventory is increaseed by items purchased (direct materials or finished goods), costs incurred in creating a product (for manufacturers), and an allocation of overhead to the creation of the product. As inventory is sold, the cost of the inventory sold is recorded by reducing inventory (a credit) and increasing Costs of goods sold (a debit).
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Is freight out and freight in included in cost og goods sold calc?
ASC 330, Inventory, states shipping costs (read: freight out) do not contribute to bringing inventories to their present condition and location and as such should not be included in inventory costs. Because freight out is not considered a product cost, not only would you not capitalize freight out into inventory on the balance sheet, but you would also not record this cost as a COGS item, but rather a sales expense (SG&A). On the other hand, freight in is a purchase cost as it gets inventory to its current location (ie your warehouse), so that cost should be capitalized as inventory on your balance sheet which will later be recognized as a COGS item when you sell the related inventory.
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What is the name of a good inventory software program for an Australian company?
I would give inFlow Inventory systems a try. They have a fairly easy to use product and have clients based in over 60 countries. Another good inventory software to recommend is called Chronos eStockCard inventory system. This software is pretty easy to use and full of powerful features. It has been widely used in many different industries worldwide included Australia.