Question

Accounting systems that keep track of the costs of individual items normally do so using the _______ or ________ cost flow assumption, regardless of the cost flow assumption used for financial reporting

Answer 1

Accounting systems in business use either specific identification or weighted average cost flow assumption.

Step-by-step explanation:

The accounting systems that keep track of the costs of individual items normally do so using the specific identification or weighted average cost flow assumption, regardless of the cost flow assumption used for financial reporting.

The specific identification method tracks the cost of each individual item sold or remaining in inventory, while the weighted average method calculates the average cost of all items in inventory.

For example, if a store sells high-value items like electronics or jewelry, it might use a specific identification method to accurately track the cost of each unique item. On the other hand, a grocery store that sells similar items in large quantities might prefer the weighted average method to simplify its cost-tracking process.

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