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Change in Inventory method

  • 1.  Change in Inventory method

    Posted 09-21-2018 12:01
    Client is in process of changing from periodic to perpetual inventory valuation.
    What is procedure in notifying IRS?

    Would appreciate a response.

    Thanks,

    Jerry Rosenberg

    --
    Jerome Rosenberg, CPA
    Jerome Rosenberg CPA, P.C.
    Tel: (631) 777-2290
    Fax: (631) 777-2293
     
     


  • 2.  RE: Change in Inventory method

    Posted 09-21-2018 21:08

    Interesting question .

     

    First, let me ask the question which may sound so basic.  That is the difference between the two methods.

     

    Am I correct to say that perpetual charges COGS with every sale. As opposed to the periodic which means all purchases and related costs are added to beginning inventory, and then ending inventor is subtracted to arrive at COGS. 

     

    If I am right, then in either Perpetual or Periodic, you are employing a cost flow assumption. Those cost flow assumptions being average , fifo or lifo.

    Most GL systems , I would think , use Average cost flow as does QuickBooks. Hence, unless you are changing the cost flow assumption of valuing the ending, I do not believe you have an accounting change.

     

    Let's see what others think.

     

    Abby Alhante,  CPA

     

    Kurcias  & Alhante, LLC  CPAs

    525 Broadhollow Road   Suite 104

    Melville NY  11747

    516.829-5890  Fax 516-829-3976

    Mobile 516-381-9301

    AbbyA@KurciasAlhanteCPAs.com

    ( E mail response preferred )