Inventory Systems And The Inventory System

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Merchandise Inventory Merchandise Inventory has two types of Inventory systems, Perpetual and Periodic. The perpetual inventory system is based on a running total of units as well as using point-of-sales (POS) registers and scanner (Price, Haddock, & Farina, 2015). The perpetual inventory system on the other hand is based on a periodic count of goods that are on hand, requires that a physical count of the inventory be performed when creating the financial statements of a company. There are also different methods that are used when assigning costs to products, these are: Specific Identification Method, Average Cost Method, FIFO Method (First In-First Out), and LIFO Method (Last In-First Out). When getting ready to choose a method it is…show more content…
The gross profit method will assume that the rate of gross profit on the sales and the ratio of the cost of goods sold to the net sales are relatively constant for each period (Price, Haddock, & Farina, 2015). Whereas the retail method will estimate the inventory cost by applying a ration to the cost to selling price for the current accounting period (Price, Haddock, & Farina, 2015). Finally there are also inventory controls that each company should implement these can include but are not limited to: limiting access to inventory, requiring documents for inventory to leave the warehouse, taking a physical count, and including technology upgrades such as bar scanners (these depend on company size) (Price, Haddock, & Farina, 2015). Property, Plant, and Equipment Property, Plant, and equipment will include real property and tangible personal property (Price, Haddock, & Farina, 2015). Real property includes items such as land and land improvements, while tangible personal property will typically include: machinery, furniture, computers and vehicles etc. (Price, Haddock, & Farina, 2015). When recording these it is important to remember that there are certain costs which are associated to each of these. Included in the cost of tangible personal property are; gross purchase price less the discount, transportation cost, installation cost, as well as costs of adjustments or modifications which are needed for the assets that are
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