Inventory Accounting and Costing
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Inventory Accounting and Costing Course
Introduction:
Whether you are a merchandiser, manufacturer, contractor, or a service provider, inventory has a major impact on your net income and the balance sheet In this course, participants are guided step by step through best practices for the purchasing process, the allocation of direct costs, indirect costs and production costs and comparisons between the different cost flow assumptions such as FIFO, LIFO and weighted average cost along with their impact on the financials and the physical counting of goods.
The inventory Accounting and Costing Course training course will discuss the importance of having accurate inventory figures reflect the net realizable value, use Excel and pivot tables to analyze inventory balances, calculate values of obsolete inventory, and simulate calculations of weighted average cost.
Participants will study this process from the physical counting of goods to the inclusion of costs such as transport or insurance, to the calculation of the value of the goods thereby connecting the cost of goods to retained earnings and the balance sheet. You will also look into the different methods of apportioning costs to a stock item and more!
Course Objectives:
By the end of the Inventory Accounting and Costing Course, you will:
- Identify the types of inventories and recognize the timing of inventory ownership.
- Specify the situations in which the periodic inventory system should be used, and how the perpetual system can be enhanced.
- Identify the situations that can cause incorrect inventory transactions.
- Recognize the activities needed to establish a system of inventory record keeping, and how such a system may be rendered less accurate.
- Estimate ending inventory using the retail method.
- Recognize and correctly measure inventory under International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP)
- Explain the proper use of write-downs, write backs, and the impact of change in inventory accounting policies on financial statements
- Apply professional judgment in accounting for inventory not on hand
- Categorize different inventory cost flow assumptions and describe how they affect the company’s financial position and income statement
- Outline the various approaches for cost accounting
- Use Excel and pivot table tools and techniques to analyze inventory and calculate weighted average costs
Who Should Attend?
This Inventory Accounting and Costing Course is ideal for:
- Inventory professionals, including supervisors, account managers, purchasing and facility supervisors and coordinators, financial controllers, new employees handling inventory, internal auditors, warehouse assistants and managers, and operations managers.
Course Outlines:
Introduction to inventory
- Current assets and inventory management
- The four reasons for keeping inventory
- Inventory cycle from purchases to sales:
- Ordering and receiving
- Sales and delivery
- Best practices in the count process
- Inventory industry types: merchandise, manufacturing, construction, and real estate
- Differences between inventory, fixed assets, and investment properties
- Understanding and analyzing inventory ratios
Accounting for Inventory
- Perpetual versus periodic inventory methods
- Cost accounting versus financial accounting
- Cost allocation techniques:
- Direct material, direct labor, and manufacturing overhead
- Initial recognition
- Cost of purchase, cost of conversion, and treatment of discounts and rebates received
- Measurement after recognition
- Calculating ‘net realizable value’ (IFRS)
- Calculating market price under the Lower of Cost or Market (LCM) method (GAAP)
- Estimating and booking write-downs for slow-moving and obsolete inventory
- Accounting for write-backs of impairment under IFRS and GAAP
- Accounting for errors identified in the physical count
Accounting for Inventory: Special Topics
- Accounting for inventory not on hand
- On consignment
- Goods in-transit: defining incoterms
- Sold with right of return
- Sold subject to installation and inspection
- Sold on a ‘bill and hold’ basis
- The concept of ‘inventory credit’: inventory used as collateral to raise finance
- Impact of Accounting policies changes on Financial Statements
- Inventory required disclosures
Inventory Cost Flow Assumptions
- First-in First-out (FIFO) and Last-in First-out (LIFO)
- Weighted average and moving average
- Specific identification
Inventory Estimation and Cost Accounting Approaches
- Inventory estimation techniques
- Gross profit method
- Retail method
- Cost accounting approaches
- Traditional costing versus activity-based costing
- Target costing versus cost plus pricing method
- Standard cost accounting
- Throughput accounting
- Using Excel for efficient analysis of inventory
- Consolidating your inventory data
- Validating data for accuracy
- Analyzing slow-moving and obsolete inventory
- Tests of recalculating weighted average and moving average costs
- Using pivot tables to efficiently analyze and report on inventory issues
