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Week 7 · Readings & resources

Week 7 — Readings & Resources

Financial Accounting Free sample edition

Your primary reading is Chapter 7 (in this module). Everything below is the optional, go-deeper layer — pick what helps, skip the rest.

How to use this page

This page has 9 items (3 readings and 6 videos). Allow 50–59 minutes for everything. Each group points back to the matching chapter section and class-session segment, so use the full menu when you want more, or take the quick path below.

Every video here has captions: turn them on with the CC button in the player. The chapter covers the same ideas in text.

Pick-one quick path (20–20 min total)

① Oldest costs first or newest costs first

Chapter 7, Section “Compare the methods by their effects” · Session 2, Segment 7, “Comparing the methods by their effects” · Remember: when costs rise, FIFO gives lower cost of goods sold and LIFO gives cost of goods sold closer to current costs; neither is ranked.

  • FIFO vs LIFO example — The Finance Storyteller — a sketched example of a toy company that stacks identical boxes bought at three rising unit costs and sells them over three months, costing each month's sales both ways and ending on the same pattern as the helmets: FIFO shows the lower cost of goods sold and the higher gross profit in the early months. This builds on Week 6's work with cost of goods sold and gross profit. It costs each month's sales as they happen rather than with one end-of-period count, and its figures are the video's own. (video, 11 min) (captions: creator)
  • LIFO method accounting — The Finance Storyteller — the same toy company costed by LIFO alone, step by step, with the boxes left in ending inventory traced back to the oldest purchase; it says plainly that LIFO is acceptable under U.S. GAAP and prohibited under IFRS. Its remarks about income tax are the video's own and fall outside this course, which does not teach tax. (video, 7 min) (captions: creator)
  • FIFO and LIFO Accounting for Small Businesses — CO— by U.S. Chamber of Commerce — a business-association article that works one phone-case example both ways, with beginning stock and two purchases at rising costs, and shows FIFO's lower cost of goods sold and higher gross profit beside LIFO's. Read it critically: it recommends a method and discusses taxes and switching rules, while this course compares the methods by their effects and leaves tax aside; it also says only that international companies cannot use LIFO, where the rule is that IFRS does not allow it. (reading, 6–8 min)

② Tracking each unit or averaging the costs

Chapter 7, Section “Spread one cost over every unit: weighted average” · Session 2, Segment 6, “One average cost” · Remember: weighted average divides total cost by total units, so each layer counts by its size.

  • Specific Identification Method — Zoho Inventory — an inventory-software company's short explainer on tracking the cost of each individual unit, with examples such as handmade jewelry, artwork, and custom-built vehicles, the few-costly-unique goods the method fits. Use it while working through the Week-7 module overview. It describes tracking with scanned tags in software; the accounting idea is the same with paper records. (video, 2 min) (captions: automatic)
  • Weighted Average Method — Zoho Inventory — the same series on one average cost for every pair of sneakers, and why a plain average of the three purchase prices gives the wrong figure: the weighted average divides total cost by total units. Its prices rise and then fall, so it is a good contrast with the helmets' steady rise, and its figures are the video's own. (video, 4 min) (captions: automatic)
  • Publication 538, Accounting Periods and Methods — Internal Revenue Service — the IRS guide, deep-linked to its Identifying Cost part, which describes specific identification, FIFO, and LIFO in plain terms and states that when prices are rising LIFO gives a larger cost of goods sold and a lower closing inventory, with the opposite when prices fall. Read only that part and the short comparison after it; the tax rules around it are outside this course. (reading, 5–7 min)

③ When the shelf is worth less, and when the count is wrong

Chapter 7, Section “Trace an inventory error across two years” · Session 2, Segment 9, “An inventory error across two years” · Remember: this year's ending inventory is next year's beginning inventory, so one counting error misstates two years in opposite directions.

  • New Inventory Standard: ASU 2015-11 — McKonly & Asbury — an accounting firm's three-minute update on the FASB's inventory rule: the old lower-of-cost-or-market test chose among three measures, while the new rule compares cost with net realizable value, the estimated selling price less reasonably predictable costs of completion, disposal, and transportation, for all inventory except inventory measured by LIFO or the retail inventory method. It lists damage, physical deterioration, obsolescence, and falling prices as reasons net realizable value can drop below cost, with the loss recorded in the period it occurs. Skip its remarks on when the rule took effect, which this course does not teach; the course's helmet example writes FIFO ending inventory down by 60 dollars. (video, 3 min) (captions: automatic)
  • Effects of Inventory Errors — Chris Harper — a two-year walk through the cost of goods sold equation in which an overstated ending inventory lowers the first year's cost of goods sold and raises the second year's, so the two-year total is unchanged while each year is wrong. Its years and dollar amounts are the video's own example. Stop here before internal control; next week takes that up. (video, 7 min) (captions: automatic)

Optional one-stop reference (free online reference)

Heads-up (links rot): these point to outside sites that occasionally move or rename pages. If a link ever fails, tell your instructor and use the reference above in the meantime.

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