Accounting for Inventory Merchandise Inventory is typically the largest asset of a merchandising business. Available but no excess Cost of Merchandise.

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Presentation transcript:

Accounting for Inventory Merchandise Inventory is typically the largest asset of a merchandising business. Available but no excess Cost of Merchandise Inventory is reported on both the Balance Sheet and Income Statement Affects Retained Earnings and Current Assets on the Balance Sheet Gross Profit and Net Income on the Income Statement

Quantity of Merchandise Inventory Larger Than Needed More space and Money Wastes capital More Expenses Less than Needed Sales lost to competitors Insufficient Variety Small orders cost more

Inventory Methods Physical Physically counting, measuring, or weighing merchandise on hand. Also known as Periodic. Typically performed at specific times (End of Fiscal Period) Perpetual Continuous record of tracking merchandise on hand. Also known as Book Inventory Typically tracked using computer systems.

INVENTORY RECORD Unit Price and Total Cost 1. Stock Number and Description 2.Actual Units on Hand Lesson 22-1, page 575 Used during Physical Inventory

STOCK RECORD New Balance on Hand 1. Purchase Information 2.Sales Information Lesson 22-1, page 576 Used for Perpetual Inventory

Universal Product Codes Used to perform the function of a stock record. Coincides with the Point Of Sale (POS) system to efficiently keep track of inventory, reducing the inventory when a product is sold. Physical Inventory is still needed to affirm accuracy.