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1、中美会计差异=InventoryInventory A. Inventory Accounting Similarities U.S. GAAP is similar to PRC GAAP in many aspects: a) The definitions of inventory are the same the raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a businesss assets that are re
2、ady or will be ready for sale. b) Share some of the same methods of determining the cost of inventories. FIFO (First-in, first out), weighed average method, moving weighed average method and specific identification method are used to determine the cost by both of the countries. (Detail discussions s
3、ee differences part) Differences a) In U.S., inventories should be stated at the LCM method, which stands for lower-of-cost-or-market. And market value is the lower of replacement cost and net realizable value minus normal profit margin. In PRC, inventories should be stated at the lower of cost and
4、net realizable value. (Net realizable value is the estimated selling price less the estimated costs of completion and sale). b) In U.S., write-down for LCM is recorded in cost of goods sold .While in PRC, LCM provision is recorded in General and Administration expenses. c) In U.S., reversal of inven
5、tory write-downs is prohibited, while in PRC, reversal of inventory write-down is required if certain criteria are met. For example, the write downs should be reversed if the factors that caused the decline in inventories prices disappear. However, if the value of inventories increases not because o
6、f the above reason but for some newly-appeared reasons, the write downs are not to be reversed. d) As for the methods of determining the cost, in U.S, in addition to the methods used in PRC, the cost of inventory can also be determined using the LIFO method. Whats more, the retail method is allowed
7、in U.S. but not allowed in PRC accounting regulations. The retail price is the price at which the goods are sold to the customers, thus the method of retail inventory is thus, a valuation of stock according to its retail value. One thing to notice that this method is generally used in sales organiza
8、tion where the basic business model is based on the activity of purchase and sale of goods. One cannot use this method for production-based business models. B. Periodic Inventory System Similarities Under periodic inventory system, both PRC and U.S shall not record the cost of goods sold when sales
9、conducted. Usually, the inventory accounts only reflect the amount at the beginning of the period and the ending inventory balance is determined by physical account. The cost of goods sold is calculated by down packing. Differences a) For inventory recording, in order to record the purchases of merc
10、handise, the account of Purchase, Purchase returns and allowances”, “purchase discounts, “purchase freight accounts” is set respectively in U.S., while in China, the purchases are only recorded by debit the “stock merchandise and raw materials account. b) The second difference lies in the area of in
11、ventory purchase returns, discounts, cash discounts, and freight in fees. Give more details, if there is a refund or a discount on inventory purchased, in U.S., the company should directly credit the purchase returns and allowances account, while in China the company should credit stock account. Wha
12、ts more, if there are cash discounts, the U.S. accountant should credit the cash discount and write down the accounts payable at the same time, while in China, the accountant should credit the financial expenses account and offset against payables. Last, if the purchaser bears the shipping costs (fo
13、r example FOB shipping point), in U.S. the purchases freight” account will be debited, while in China the operating expenses account will be debited. c) The third difference under periodic system is whether or not to prepare adjusting entries the end of each period on the calculation of the cost of
14、goods sold. In China, both Financial expenses (cash discount) and “operating expenses” (buyer should bear the freight) accounts are a “gain or loss” category account, which is directly credited to the current profit for the year, so at the end of the period, it is no need to do the adjusting entries
15、. Under the periodic inventory system, The U.S sets the purchases account, adding purchases allowances”, “discounts” and additional account, thus two adjusting entries are need to calculate the cost of sales of inventories. C. Perpetual Inventory System Differences The difference under perpetual inv
16、entory system is the treatment of inventory checks. Under perpetual inventory system, the gain or loss of inventory should be recorded in every sell or purchase, thus to ensure the accounts match the reality, both of the countries need to do the physical check, and use the account entries to adjust.
17、 In China, if there is a gap between the booking amount and the physical amount, a company should record the gap using the P/L for assets taking account. Which means, when the loss (or profit) in the first place, the company should first debit (or credit) the P/L for taking account, then when the co
18、mpany find out the cause of that loss (or profit), it record in different accounts. For example, if the loss was caused by nature disaster, the company should debit the non-business expenditure, and credit the P/L for assets taking. However, the accounting treatment on this issue is much simpler in U.S., since there is no to go through the P/L for assets taking account, instead of directly recorded the inventory differences in the Inventory gain or loss account. That is, when there is a loss (or profit) in inventory, the company should debit (or credit) the inventory loss/ gain account.
