Inventory Cost Flow Illustration Assume that at the end of the reporting period, the perpetual inventory account reported an inventory balance of $4,000. However, a physical count indicates inventory of $3,800 is actually on hand. The entry to record the necessary write-down is as follows.
Inventory Over and Short
Note: Inventory Over and Short adjusts Cost of Goods Sold.
Goods and Costs Included in Inventory Goods Included in Inventory A company recognizes inventory and accounts payable at the time it controls the asset. Passage of title is often used to determine control because the rights and obligations are established legally.