0:00:00.480,0:00:03.040

All right here we go, specific

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notification the first one that we're

0:00:03.040,0:00:05.440

going to talk about

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and as the name implies we're

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specifically identifying which inventory

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has been sold which one is leaving

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uh and which ones we can expense we know

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exactly how much they cost because it's

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specifically identified.

0:00:14.960,0:00:18.960

So how does this one work and typically

0:00:17.520,0:00:21.439

we call this SI,

0:00:18.960,0:00:23.039

this usually is only practical for

0:00:21.439,0:00:24.480

businesses that have high price low

0:00:23.039,0:00:27.920

turnover inventory.

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If you're talking about a business that

0:00:27.920,0:00:32.079

sells

0:00:28.400,0:00:33.040

a lot of the same goods this is really

0:00:32.079,0:00:34.480

hard to do because

0:00:33.040,0:00:36.320

if I sell them a lot over the same a

0:00:34.480,0:00:38.399

given amount of time I don't know

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exactly which one I sold

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however if I'm like a car dealership I

0:00:40.640,0:00:44.079

know exactly what car I sold

0:00:42.399,0:00:45.680

I know exactly how much it cost me so I

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can know exactly how much to expense it

0:00:45.680,0:00:48.559

with,

0:00:46.320,0:00:50.559

if I'm doing it for fruit I don't know

0:00:48.559,0:00:51.760

which batch of the fruit it came from so

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I don't know exactly which one

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I can expense I would have to use an

0:00:53.360,0:00:58.160

assumption for that one,

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but SI is very specific obviously like

0:00:58.160,0:01:01.039

the name implies,

0:00:59.280,0:01:02.879

uh what this one does conceptually what

0:01:01.039,0:01:05.519

it does is as the sales occur

0:01:02.879,0:01:07.439

cogs cost of goods sold is charged with

0:01:05.519,0:01:09.280

the actual or invoice cost

0:01:07.439,0:01:10.880

leaving the actual cost of inventory on

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hand still in the inventory account.

0:01:10.880,0:01:14.000

So what I sold is actually the number

0:01:13.360,0:01:16.159

that I actually

0:01:14.000,0:01:17.920

it cost me that's what I expensed and

0:01:16.159,0:01:19.360

then what I still have in my warehouse

0:01:17.920,0:01:19.840

is the actual number of what I still

0:01:19.360,0:01:21.280

have

0:01:19.840,0:01:23.360

because I know exactly which ones they

0:01:21.280,0:01:23.920

are. Now for me when I learned this it

0:01:23.360,0:01:25.360

made

0:01:23.920,0:01:27.520

way more sense to me when I saw it

0:01:25.360,0:01:28.720

visually I wanted to see things move so

0:01:27.520,0:01:29.680

that's what I want to show you kind of

0:01:28.720,0:01:31.759

hopefully this will make a little bit

0:01:29.680,0:01:33.119

more sense to you with SI so let's look

0:01:31.759,0:01:34.159

at a quick example right now we're not

0:01:33.119,0:01:35.759

going to go through the whole process

0:01:34.159,0:01:38.240

but I want you to see what this means

0:01:35.759,0:01:38.799

uh what we're dealing with conceptually.

0:01:38.240,0:01:40.560

So

0:01:38.799,0:01:42.000

here's our warehouse we're delta company

0:01:40.560,0:01:45.200

and we have all these things we have

0:01:42.000,0:01:47.920

some inventory that we're selling for 25

0:01:45.200,0:01:49.360

it cost us 25 a piece to bring them in

0:01:47.920,0:01:51.200

and that we had that in our

0:01:49.360,0:01:53.439

beginning inventory and then we bought

0:01:51.200,0:01:54.079

some more on april 15th for 27 dollars a

0:01:53.439,0:01:55.840

piece

0:01:54.079,0:01:57.840

and then we bought some more on october

0:01:55.840,0:01:59.840

13 for thirty dollars a piece,

0:01:57.840,0:02:01.920

okay, so what's in our warehouse is what

0:01:59.840,0:02:04.479

we have available to sell.

0:02:01.920,0:02:06.240

Now let's read the problem it says

0:02:04.479,0:02:09.039

assume that delta company sold

0:02:06.240,0:02:11.280

29 units so we know we sold 29 units but

0:02:09.039,0:02:13.040

here's where SI comes into play,

0:02:11.280,0:02:14.160

of which six units came from the

0:02:13.040,0:02:15.920

inventory that was already in the

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warehouse at the beginning of the year,

0:02:15.920,0:02:19.840

12 came from the inventory purchased on

0:02:17.680,0:02:21.840

april 15th, and 11 came from the

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inventory purchased on october 10th

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excuse me 13 that's title.

0:02:25.280,0:02:29.040

That right there lets me know that I can

0:02:26.959,0:02:30.400

do specific identification without that

0:02:29.040,0:02:32.160

information I couldn't because there's

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no specific identity

0:02:32.160,0:02:36.800

of where these came from, so basically

0:02:34.640,0:02:38.480

what we're saying is I sold 29 units and

0:02:36.800,0:02:40.800

I know exactly where they came from

0:02:38.480,0:02:42.319

of that six of them came from the ones

0:02:40.800,0:02:43.840

that I had in january first so I'm going

0:02:42.319,0:02:44.959

to take six out of my warehouse

0:02:43.840,0:02:47.680

and give them to the person that bought

0:02:44.959,0:02:49.280

them and then on the april 15th one

0:02:47.680,0:02:50.160

I'm going to take 12 of those and I'm

0:02:49.280,0:02:50.959

going to give them to the person that

0:02:50.160,0:02:53.200

bought them

0:02:50.959,0:02:54.720

and of the april 13th one I'm going to

0:02:53.200,0:02:55.680

take 11 of those and give them to the

0:02:54.720,0:02:57.440

person that bought them,

0:02:55.680,0:02:59.120

so now everything in my warehouse is

0:02:57.440,0:03:00.879

what I have still available

0:02:59.120,0:03:02.640

that's my ending inventory balance

0:03:00.879,0:03:04.800

everything outside the warehouse is what

0:03:02.640,0:03:06.800

my cogs is because I've sold those

0:03:04.800,0:03:08.720

therefore I need to expense them and

0:03:06.800,0:03:09.680

that's how you do conceptually specific

0:03:08.720,0:03:11.440

identification.

0:03:09.680,0:03:13.200

In the actual next video you're going to

0:03:11.440,0:03:18.879

see the example

0:03:13.200,0:03:18.879

of specific notification. Appreciate it.

Example of the Specific Identification Method of Accounting for Inventory

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