This case study looks at how McDonald's manages its stock through its management systems and what benefits this brings. .... used in France and Germany where it has reduced costs 3 Apr 2013 COBRA Inventory Management System McDonalds uses an Informat
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Perpetual Inventory System Journal Entries
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Financial Accounting Financial Accounting Intro
Under perpetual inventory system, inventory and cost of
Accounting Principles
goods sold are updated for each sale/purchase and return
Accounting Cycle
transaction. We have already discussed the basic concept
Financial Statements
of perpetual inventory system in the comparison of perpetual-periodic inventory. Here we will learn the journal
Subsequent Events
entries which are typical to a perpetual inventory system:
Cash and Cash Equivalents Receivables
Following are the journal entries under perpetual inventory system assuming that sales and purchases are recorded
Inventories
net of discount (to learn more, see gross vs net method of
Other Current Assets
inventory purchase recording and discount on sales.).
Non-Current Assets
Inventory Purchase:
Investments
Under perpetual inventory system, a purchase is recorded
Revenue Recognition
by debiting inventory account and crediting accounts
Employee Benefits
payable assuming that the purchase is on credit. The
Accounting for Taxes
journal entry is shown below:
Lease Accounting
Inventory
— — Accounts Payable
— —
Purchase Discount:
Shareholders' Equity Current Liabilities Long-term Liabilities
Purchase discount will reduce the inventory directly. Thus: Accounts Payable
Partnership Accounting — —
Inventory
Business Combinations — —
Financial Ratio Analysis Specialized Ratios
Purchase Return: When inventory purchased is subsequently returned to the supplier, the journal entry is to debit accounts payable or accounts receivable and credit inventory account. Accounts Receivable/Accounts Payable
Managerial Accounting Intro
— —
Inventory
Managerial Accounting
— —
Cost Classifications Cost Accounting Systems Cost Allocation Cost Behavior Analysis
Inventory Sale: A transaction of sale is recorded via two journal entries in perpetual inventory system. The first one records the sale value of
Cost-Volume-Profit Analysis
inventory and the second one records the cost of goods sold and reduces the inventory balance. The two journal entries are
Relevant Costing
shown below:
Capital Budgeting
Accounts Receivable
Master Budget
— —
Sales
— —
Cost of Goods Sold
Cash Management
— —
Inventory
— —
Standard Costing Performance Measurement
Sales Return: The recording of sales return also requires two journal entries. Which are shown below: Sales Returns
— —
Accounts Receivable/Accounts Payable Inventory Cost of Goods Sold
— —
Written by Irfanullah Jan
Corporate Finance Corporate Finance Introduction
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Current Chapter Related Topics Perpetual vs Periodic System Periodic Inventory Journal Entries Cash Discount on Sales
Inventories Cost of Goods Sold Perpetual vs Periodic System Perpetual Inventory Periodic Inventory Cash Discount on Inventory Inventory Valuation FIFO Method LIFO Method AVCO Method Retail Method Gross Profit Method LCM Rule LIFO Reserve