- This topic has 0 replies, 1 voice, and was last updated 11 years, 4 months ago by
.
-
Topic
-
So for those kinds of questions that inventory turnover ratios are involved…say the following error happens:
Inventory stored at a distribution center on December 31, year 2, was inadvertently omitted during the year 2 physical inventory count, to which the general ledger was adjusted.
The journal entry to fix this:
dr Inventory xxx
cr COGS xxx
My question: Why is COGS sold credited? If the inventory was just omitted and it wasn’t even sold yet why are we decreasing COGS? My accounting may be rusty…have not taken FAR yet. I’m probably missing a concept I’ve forgotten? Please help!
This also goes for errors like “The company failed to record the materials in transit accrual for late supplier/vendor invoices”
The entry to correct would also be a dr to Inventory and cr to COGS. but we haven’t sold it yet?
- You must be logged in to reply to this topic.
