Gross Profit Method To Determine Ending Inventory (Also Called Gross Margin Method)

Описание: Accounting for inventory using the gross profit method (also called gross margin method), sometimes taking physical inventory is impractical or where inventory is destroyed or records are destroyed also auditors use this gross profit method, gross profit method relies on (3) assumptions, (1) Beginning inventory + purchases = total goods to be accounted for, (2) goods not sold must be on hand and (3) sales reduced to cost, deducted from the sum of opening inventory plus purchases equal ending, gross profit percentage is based on policies or prior period records, inventory, using the gross profit method can use to approaches to calculate ending (on hand) inventory, (1) traditional method and (2) income statement format method, using the traditional method, (beginning inventory + purchases = goods available, sales less gross profit as a percent of sales equals net sales, subtracting net sales from the goods available equals the estimated ending inventory, using the income statement approach start with gross profit on sales, subtract from total sales to determine cost of goods sold, cost of goods available subtracting cost of goods sold equals the ending inventory, detailed accounting example by Allen Mursau