Question

Determine which of the following statements are correct regarding the difference between physical flow and the cost flow of goods
a.Perishable items must have an actual physical flow of FIFO
b. A business may adopt any cost flow assumption when accounting for perishable items
c.Cost flow is an assumption about which goods/times are sold
d. Physical flow is focused on the actual movement of goods

Answer 1

Answer:

a.Perishable items must have an actual physical flow of FIFO

Explanation:

• Cost flow estimates are required to determine the cost of goods sold and to end inventory. Companies make some ump habits about what goods are sold and what items are listed (as a result of various accounting methods).
• Financial reporting and tax benefits and the actual movement of goods are not required to be accepted
• The continuous inventory system may have different end inventory and COGS yields compared to the periodic inventory system due to LIFO's calculation time and weighted average cost flow estimates.
• Reducing or exceeding the lower price of goods sold when prices fall or rise