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5-4 City's supplies inventory

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Take the beginning inventory into account.

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Consumption Method: In consumption method the business keeps continuous record of each inventory item. In perpetual system inventory is recorded as and when it is purchased and issued for consumption. Computerized perpetual system can provide up to the minute inventory data regarding Receipts, issues and balance of each item of inventory. In consumption system purchases and sales are recorded directly to inventory account. Following are the important features of this system.

1 Purchases are directly debited to inventory account. Purchase account is not involved in this accounting system.

2 Cost of Goods sold is ...

Solution Summary

The complete solution to your problem is provided in a separate word file attached herewith. Theconsumption method and purchase method in theoretical terms are fully explained and the treatment of beginning inventory for both the methods in a comparative table of accounting entries are provided.

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