Monday 17 December 2018

Method of inventory documentation

Method of inventory documentation

The Method of inventory documentation In managing the transactions of purchase and sale merchandise inventory accounting has 2 (two) methods of record keeping and the company can choose one of them, the two methods of recording are:

Perpetual Inventory Method of Recording (Perpetual Inventory Method)

"The recording of perpetual inventory transactions upon registration that is execute every time. Both to the revenue as well as expenditure on supplies." In this method, the recording of inventories conduct in the inventory cards that describe the actual inventory.

Record-keeping over the transactions carry out on an ongoing basis for every type of inventories. To ensure the accuracy of the inventory number of the physical inventory calculation is usually complete once a year.

Recording of inventories using this method is intend primarily for high-value items. For items that are easily at warehouse its expenditure and revenue is record.

Companies that sell expensive merchandise price, such as cars, furniture, household equipment. Usually using the method of logging supplies perpetual.

Characteristics of accounting record-keeping methods is:

  • Purchase merchandise for sale or purchase of raw materials for the production of debit. To its inventory and not to purchase.

  • Transportation costs to come in, purchase returns and price reductions. As well as discount purchases debit to its inventory and not to a separate account.

  • Cost of goods sold is recognized for every sale with debit cost of goods sold account, and credit the inventory.

  • Inventory control account that is support by auxiliary ledgers containing records of individual inventories. Great book helpers show the quantity and cost of every type of existing inventories in the hands.

The Physical Inventory Recording Method/Periodic (Physical Inventory Method/Periodic System).

According to physical inventory methods understanding that is as follows:

"The quantity of inventory in the hands of determined, as implied by its name, periodically. All purchase of inventory during the by debiting the account purchase accounting period are recorded. "

Explanation of the above quote is:

"The quantity of inventory in the hands of determine, as imply by its name, on a periodic basis. All purchases of inventories during. The accounting period are record by account debit purchases. "

In this method each income and expenditure is recorded in the inventory estimates i.e. different buying and selling. The disadvantage, namely the company cannot know the magnitude of the existing inventory. At a certain time and cannot figure out the price of staple goods sold for each sales transaction that occurs.

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