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A periodic inventory system is a bookkeeping method based on counting and marking down your items. It means updating the inventory balance periodically, at the beginning and at the end of an accounting period. Let’s suppose the value of a company’s inventory is $500,000 on January 1. The company purchases $250,000 worth of inventory during

In addition, since there are fewer physical counts of inventory, the figures recorded in the system may be drastically different from inventory levels in the actual warehouse. A company may not have correct inventory stock and could make financial decisions based on incorrect data. There are several ways that companies can account for their inventory.

Examples of deferred unearned revenue include prepaid subscriptions, rent, insurance or professional service fees. Get instant access to video lessons taught by experienced investment bankers. Learn financial statement modeling, DCF, M&A, LBO, Comps and Excel shortcuts. Master accounting topics that pose a particular challenge to finance professionals. What Are Examples of a Contra Asset Account?

However, the “Allowance for Doubtful Accounts” (or “Allowance for Uncollectible Accounts”) is a contra account related to the concept of bad debts. This contra-asset account reduces the accounts receivable balance on the balance sheet to its net realizable value. The Allowance for Doubtful Accounts carries a credit balance that reduces the total amount of accounts