Read Managing Your Writing of your textbook. Discuss how you should account for cost of purchases in accounting. Fully explain your answer. What would you add to the memo and what would you recommend to the owner of Abracadabra? Would periodic and perpetual inventory come into play? Why or why not?

 

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Managing Your Writing A friend of yours recently opened Abracadabra, a sportswear shop specializing V Check List Managing Planning Drafting in monogrammed athletic gear. Most merchandise is special ordered for customers. However, a small inventory is on hand. Your friend does not understand why a physical inventory is necessary before preparing the financial statements. She knows how much she paid for all merchandise purchased. Why not simply use Break Revising Managing this amount for cost of goods sold? After all, it has been paid for. Write a brief memo explaining the purpose of the physical inventory and why she should not use the cost of purchases as cost of goods sold. Managing Your Writing A friend of yours recently opened Abracadabra, a sportswear shop specializing V Check List Managing Planning Drafting in monogrammed athletic gear. Most merchandise is special ordered for customers. However, a small inventory is on hand. Your friend does not understand why a physical inventory is necessary before preparing the financial statements. She knows how much she paid for all merchandise purchased. Why not simply use Break Revising Managing this amount for cost of goods sold? After all, it has been paid for. Write a brief memo explaining the purpose of the physical inventory and why she should not use the cost of purchases as cost of goods sold.

Answer rating: 100% (QA)

Purchase is the cost of buying inventory during a period for the purpose of sale in the ordinary course of the business It is therefore a kind of expense and is hence included in the income statement ... View the full answer