Do you want BuboFlash to help you learning these things? Or do you want to add or correct something? Click here to log in or create user.

Subject 1. Cost of Inventories
#cfa #cfa-level-1 #financial-reporting-and-analysis #inventories #inventories-long-lived-assets-income-taxes-and-non-current-liabilities
There are two basic issues involved in inventory accounting:

1. Determine the cost of goods available for sale: Beginning Inventory + Purchases.

2. Allocate the cost of total inventory costs (cost of goods available for sale) between two components: COGS on the income statement and the ending inventory on the balance sheet. Note that COGS = (Beginning Inventory + Purchases) - Ending Inventory. The cost flow assumption to be adopted includes specific identification, average cost, FIFO, LIFO, etc. This issue will be discussed in subsequent subjects.

Determination of Inventory Cost

IFRS and SFAS No. 151 provide similar treatment of the determination of inventory costs.

The cost of inventories, capitalized inventory costs, includes all costs incurred in bringing the inventories to their present location and condition.

  • It includes production costs, invoice price (net of discount), transportation costs, taxes, part of fixed production overhead, etc.
  • It does not include all abnormal costs incurred due to waste of materials, abnormal waste incurred for labor and overhead conversion costs from the production process, any storage costs, or any administrative overhead and selling costs. These costs are typically expensed in the accounting period instead of being considered inventory costs.
If you want to change selection, open original toplevel document below and click on "Move attachment"


statusnot read reprioritisations
last reprioritisation on suggested re-reading day
started reading on finished reading on



Do you want to join discussion? Click here to log in or create user.