Inventory principles and terminology (Learning Objectives 1, 4, & 5)

5–10 min.

Match the accounting terms on the left with the corresponding definitions on the right.

_____1. Assigns the most recent inventory costs to ending inventory.

a.

b.

c.

d.

e.

f.

g.

h.

Conservatism Full-disclosure LIFO Average cost FIFO Consistency Materiality Specific-Identification _____2. Results in cost of goods sold that falls between what FIFO and LIFO produce assuming rising prices.

_____3. This principle is the basis for using the lower-of-cost-or-market rule.

_____4. Principle that prevents a company from using a different inventory costing method each year.

_____5. Identifies exactly which inventory item was sold. Usually used for unique inventory items.

_____6. Requires that a company report enough information for outsiders to make decisions.

_____7. Treats the most recent/newest purchases as the first units sold.

_____8. Principle that states significant items must conform to GAAP.

AppendixLO1