ACCTMIS 2200
Inventory
●Inventory – the product you sell to your customers.
● When do the inventory costs get expensed on the income statement?
○ Answer: Only when the inventory is sold! This expense is called the cost of
goods sold.
●Goods in transit – are goofs being shipped from the seller to the buyer and are thus
onboard a truck, train, ship, or plane.
● Who owns goods in transit and thus includes these goods as part of their inventory?
○ Answer: It depends on the shipping terms.
○ Two common Shipping terms
■FOB (free on board) shipping point – ownership of goods passes to the
buyer as soon as the goods are shipped.
■FOB destination point – ownership of the goods remains with the seller
until the goods actually reach the buyer.
● Important Inventory Formula:
lOMoARcPSD|9327020
