Chapter 6- Accounting by Horngren's

Consistency principle - Answer A business should use the same accounting methods and procedures from period to period. disclosure principle - Answer A business must report enough information for outsiders to make knowledgeable decisions about the company. materiality concept - Answer a company must perform strictly proper accounting only for items that are significant to the business's financial situation Conservatism - Answer a business should report the least favorable figures in the financial statements when two or more possible options are presented Ending merchandise Inventory - Answer number of units on hand x unit cost Cost of Goods Sold - Answer number of units sold x unit cost Inventory Costing Method - Answer approximates the flow of inventory costs in a business that is used to determine the amount of cost of goods sold and ending merchandise inventory Four inventory costing methods - Answer 1. Specific Identification 2. First-in, First-out (FIFO) 3. Last-in, First-out (LIFO) 4. Weighted Average specific identification method - Answer An inventory costing method based on the specific cost of particular units of inventory (Used for inventories that include cars, jewels, real estate) First-In, First-Out (FIFO) - Answer the assumption that the stock that is purchased first will be sold first Cost of goods available for sale - Answer the total cost spent on inventory that was available to be sold during a period