The price of the automobile is $28500 of which $6000 is been paid and the remainder is financed from note payable. The purchases of the automobile is increase in the non current asset. So amount paid is decrease in cash asset and increase in expense.ģ. Payment of rental expenses on 1 January, 2018 means that there is no outstanding accrued expense in the accounts. Issuance of stock is increase in capital and cash asset by $30,000Ģ. We can see that all of the above are important in managing goods for sale in a retail company.ġ. Ordering Costs : This is the entire cost incurred in processing and placing order for inventory. Purchasing Costs : This is the actual cost incurred in buying inventory and bringing it to its present location less any sales discount. This is the monetary value of the inventory items lost as a result of sharp practices or poor storage environment. Quality Costs : This is cost incurred by a firm for ensuring that product conforms to established quality standard as well as cost incurred in investigating and correcting substandard products produced. Stock-out Costs : The is the lost of income and all the expenses associated with the inability to meet customers' orders due to shortage in inventory. Carry Cost : This is the total cost incurred by an entity for taking ownership and storing inventory items, some of these costs are rent of warehouse, inventory insurance, salary of warehouse staff e.t.c.
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