Intermittent Purchase and Sell of Inventory (Accounting) - Explained
Examples of Intermittent Purchase and Sell
Written by J. Mance Gordon
Updated at April 18th, 2024
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What is the Intermittent Purchase and Sell of Inventory?
Most companies purchase inventory and then sell some of that inventory before purchasing more inventory. We refer to this as intermittent purchase and sell.
So, what is the effect of using LIFO, FIFO, and weighted average in intermittent purchases and sells.
We want to find the cost of goods sold, the gross profit, and the ending inventory.
We start by identifying the beginning inventory that were journalized in the previous reporting period and carried over to the beginning of this period.
When you purchase more inventory (we debit inventory because our inventory goes up) for cash (so we credit cash, because our goes down).
When we sell inventory, I
- Cash - I will debit my cash by the same amount.
- Sales revenue - I credit sales revenue for the price of goods x number of goods.
- Inventory - I will credit my inventory for the value of the inventory I sold.
- COGS or cost of goods - I will debit COGS (an expense) for the value of the goods that I sold.
The value for which I debit COGS will be determined by whether I used the Specific Identification, Last-In, First-Out (LIFO), First-in, First-Out (FIFO), or Weighted Average Method of Inventory Accounting.
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