Perpetual inventory system update#

Each warehouse is linked with a corresponding account head. Otherwise, it's done in larger intervals for example monthly or quarterly. Perpetual inventory management means continuous insight into your bottom line.As per the perpetual inventory system, accounting entry is done for every stock transaction. An automated system like Inventory Control version 7 - which has the ability to reconcile inventory data with your Quickbooks® accounting package - can easily facilitate the task. If you sell high-cost, low-volume items such as fancy cars, expensive furs and lavish jewelry, you can use specific identification to track each inventory item separately. A prudent business owner may liberally deploy video cameras throughout the warehouse and selling areas to deter the mysterious disappearance of inventory items.

Your accounting system should also be set up to record returns and discounts - they affect your profit margins.

For example, if you markup your merchandise by 25 percent, each $1 million of sales revenue represents $750,000 in COGS. You can also estimate your COGS by multiplying your sales figures by your 1 minus your markup. You may rely on different cost flow methods such as LIFO, FIFO and weighted average to figure your cost of goods sold. You can figure your ending inventory for a period by adding additional inventory purchases to your starting inventory and subtracting out the cost of goods sold. You assign these costs to accounts payable and later to cash when you write the check.

Perpetual inventory system update#

When you purchase inventory in a perpetual inventory system, you then update your inventory account not only with the cost of the items but also for additional costs such as inbound freight. See related: Why Excel is bad for inventory tracking ACCURATE ACCOUNTING STARTS WITH EFFECTIVE INVENTORY MANAGEMENT Stay away from hand-written inventory cards - they can be filled out incorrectly, illegibly or not at all. Simultaneously, your sales staff uses point of sale terminals to track items sold. Your warehouse personnel are usually equipped with wireless scanners to let them capture inventory movements in real time. A central database keeps track of where items are stored and how many items reside at each storage location or bin. When you use automated tracking, inventory items and their storage locations are bar coded. If you manage your perpetual inventory system well, you can assume the data is reasonably accurate. But don’t kid yourself - over time, the perpetual count will deviate from reality and the only cure is a physical count. The nice thing about the perpetual system is that you have timely information and you don’t have to perform as many physical counts.

Inventory items used to produce other inventory items.

With perpetual inventory systems, you continually update your records to reflect: The perpetual inventory system is one method to keep track of your inventory. You must also keep tabs on items lost through damage, spoilage, obsolescence, misplacement or theft. This means you must know how much you have of each item. You’ve got to keep track of these items, as they represent your future revenues. Inventory consists of wholesale merchandise you resell and products you manufacture or assemble.