Question

The following is an excerpt from a conversation between Paula, the warehouse manager for Miuccio Foods Wholesale Co., and its accountant, Mike. Miuccio Foods operates a large regional warehouse that supplies produce and other grocery products to grocery stores in smaller communities.

Paula: Mike, can you explain what's going on here with these monthly statements?
Mike: Sure, Paula. How can I help you?
Paula: I don't understand this last-in, first-out inventory procedure. It just doesn't make sense.
Mike: Well, what it means is that we assume that the last goods we receive are the first ones sold. So the inventory remaining on the books consists of the items we purchased first.
Paula: Yes, but that's my problem. It doesn't work that way! We always distribute the oldest produce first. Some of that produce is perishable! We can't keep any of it very long or it will spoil.
Mike: We only assume that the products we distribute are the last ones received. We don't actually have to distribute the goods in this way.
Paula: I always thought that accounting was supposed to show what really happened. It all sounds like “make believe” to me! Why not report what really happens?

Respond to Paula's concerns.

Answer 1

Answer:

It is correct that accounting should show what truly happened . The inert circumstance is that actual expense of stock is recorded . Anyway , a few times taking into account the volume of product and the frequent changes in costs ,the organization follows a specific system of stock or inventory accounting. The product is sold according to the framework and nature of the item.

Gary ought to be informed that accounting is recording ,what is really happened . Be that as it may ,the stock costing is according to the costing strategy adopted by the business house.