كورس UNIT 2 : CMA PART 1
MR:amr taison
MR:mohamed cma
MR:desoky kh.
MR:m.batayneh
1) Overview
2) Allowance for Customers’ Right of Sales Return
3) Allowance Method (Required under GAAP)
4) Income Statement Approach (Percentage of Sales)
5) Balance Sheet Approach (Percentage of Receivables)
6) Collection of Accounts Previously Written Off
7) Factoring of Accounts Receivable
MR:amr taison
MR:mohamed cma
MR:desoky kh.
MR:m.batayneh
1) Overview
2) Cost Basis of Inventory -- Initial Measurement
3) Inventory Accounting Systems
4) Inventory Period-End Physical Count
5) Inventory Estimation
6) Inventory Errors
MR:amr taison
MR:mohamed cma
MR:desoky kh.
MR:m.batayneh
1) Specific Identification Method
2) Average Method
3) First-in, First-out (FIFO)
4) Last-in, First-out (LIFO)
5) Retail Inventory Method
6) Cost Flow Methods -- Comparison
MR:amr taison
MR:mohamed cma
MR:desoky kh.
MR:m.batayneh
1) Statement of Rule
2) Measurement of Inventory at the Lower of Cost or Market (LCM)
3) Measurement of Inventory at the Lower of Cost or NRV (LCNRV)
4) Inventory Measurement at Interim Dates
| G.2020 | G.2022 | mr.amro taison |
|---|---|---|
| 2.1 | 2.1 | lec. 5 |
| 2.2 | 2.2 | lec. 5 |
| 2.3 | 2.3 | lec. 5 |
| 2.4 | 2.4 | lec. 5 |
1- What is account receivable?
It is the cash owed to the company from its customers, and it means that the company has provided a service or sold goods to a customer and the payment has not yet been collected. In most cases, these payments are due within a relatively short period of time, ranging from a few days to less than a year
2- What are the accounting methods for bad debts?
Direct method: Through this method, the company writes off the debt when it is unable to collect it
Indirect method: depends on a prior allowance for doubtful debts
Indirect method: depends on a prior allowance for doubtful debts
3- What are the two allowance methods?
1) Percentage of sales: by this approach, the company estimates the credit loss expense for the period as a percentage of sales on credit
2) Percentage of Receivables: by this approach, the ending balance of the allowance for credit losses is determined as a percentage of the ending balance of accounts receivable.
2) Percentage of Receivables: by this approach, the ending balance of the allowance for credit losses is determined as a percentage of the ending balance of accounts receivable.
4- What is the used equation for reconciliation the beginning and ending balances of gross accounts receivable?
Beginning accounts receivable
+ Credit sales during the period
– Cash collected on credit sales during the period
– Accounts receivable written-off during the period
= Ending accounts receivable
+ Credit sales during the period
– Cash collected on credit sales during the period
– Accounts receivable written-off during the period
= Ending accounts receivable
5- What is meant by Accounts Receivable Factoring?
Factoring meant that The Company transfers the responsibility for collecting the debt from it to a third party, i.e. the company sells this debt to the third party for an amount less than its actual amount.
6- How is the cost of inventory determined?
The cost of inventory includes its purchasing cost in addition to all costs that make inventory ready and available for sale, such as shipping, insurance, customs and warehousing.
7- What are the Inventory Accounting Systems?
A) Perpetual inventory system: According to this system, the inventory accounts are updated after each purchase or sale by the company
B) Periodic inventory system: According to this system, the inventory accounts (and COGS) are updated at specific intervals, such as quarterly or annually
B) Periodic inventory system: According to this system, the inventory accounts (and COGS) are updated at specific intervals, such as quarterly or annually
8- When the company use Inventory Estimation?
In the cases where a physical inventory is not possible, such as destroying inventory records
9- What are the types of inventory errors?
Recording inventory at the end of the year with a more or less value than its real value
Recording purchases during the year with a more or less value than its real value
Recording purchases during the year with a more or less value than its real value
10-What are cost flow methods of inventory?
1) Specific Identification Method
2) Weighted average Method
3) Moving average Method
4) First-in, First-out (FIFO)
5) Last-in, First-out (LIFO)
6) Retail Inventory Method
2) Weighted average Method
3) Moving average Method
4) First-in, First-out (FIFO)
5) Last-in, First-out (LIFO)
6) Retail Inventory Method
11- Which method is not allowed according to IFRS?
LIFO
12- What are the uses of the Retail Inventory Method?
1) Preparing interim and annual financial reports in accordance with GAAP
2) Federal income tax purposes (in America)
3) Verify the physical inventory of the end-of-term inventory and the cost of goods sold
2) Federal income tax purposes (in America)
3) Verify the physical inventory of the end-of-term inventory and the cost of goods sold
13- Give an example for LIFO method disadvantages.
Management can affect net income by making a purchase at the end of the period which will change the cost of goods sold
It can lead to unrealistic results in profits, inventory cost and cost of goods sold when inflation occurs (increasing prices)
It can lead to unrealistic results in profits, inventory cost and cost of goods sold when inflation occurs (increasing prices)
14- What are the requirements for applying the moving average method?
The use of this method in inventory valuation requires calculating the average unit cost after each purchase of goods. This average is used in evaluating all the outgoing quantities of inventory before the next purchase, which may affect the average unit cost
15- What does inventory measurement or evaluation depend on?
It depends on the cost flow method used
* When using LIFO method, or the retail method, the inventory is measured at the lower of cost or market.
* When using a method other than the two mentioned above, inventory is measured at the lower of cost or net realizable value
* When using LIFO method, or the retail method, the inventory is measured at the lower of cost or market.
* When using a method other than the two mentioned above, inventory is measured at the lower of cost or net realizable value
16- What are the reasons for decreasing inventory value?
Inventory obsolescence - change in price level - decrease in demand ....
17- What is the rule of lower of cost or market?
When preparing the annual financial statements, the value of inventory is determined at cost or market, whichever is lower, so that the inventory must be reduced to the market value if its value becomes less than its cost at the end of the annual reporting period.
18- Inventory valuation losses must be recognized as..
Loss in a separate item (in cost of goods sold) in the current period's income statement
19- What is the difference between GAAP and IFRS in recognizing inventory gains and losses?
Inventory decrease losses are recognized in the income statement in accordance with GAAP and IFRS, but the increase is recognized in accordance with IFRS only
20- How the inventory is carried according to GAAP and IFRS?
IFRS: inventory is carried at the lower of cost or net realizable value
GAAP: inventory is carried at the lower of cost or market value
GAAP: inventory is carried at the lower of cost or market value