Importance of Inventory Count

Take the Stress off Counting Inventory

It’s important to have a handle on inventory. Regular inventory count will let the owner know which items are fast moving and which items are slow moving and adjustments can be made accordingly.

Inventory count can be a pain. That’s why it’s done once a year at tax time and not every 3 months which is recommended by accountants, bookkeepers and business coaches.

Set up the inventory on an inventory software system. When you purchase product increase inventory and when you sell the product decrease inventory. All inventory software come with reporting options and one of them is a report to count inventory.

The software works on a coding method. For each item you have to create a bar code or a home made code. Print these codes on a labelling machine or printer and stick the labels on the shelves. This way you will know if you are running out of products by just glancing at the shelves and inventory count will be less stressful and more accurate.

A client asked “why am I not making money” that is a million dollar question.

so, we sat down and reviewed the products he purchased and his markup.

Well, we found the markup is healthy but it’s still not enough to take care of overhead such as wages, heat, rent, telephone etc.

We added the *fixed overhead expenses to the cost of items he has for sale. We realized the sale price on product has to be increased in order to pay overhead and leave some money for the owner.

Take a look at your overhead and make sure you are considering them when pricing your inventory.

*Fixed overhead expenses are those that come every month. They are re-accuring expenses. Ex: Telephone, Internet, rent, wages, heat, security etc.

Inventory count is important as well as pricing your inventory to make a profit.





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Posted by nooshin - December 13, 2012 at 9:38 am

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Inventory Accounting

Inventory Accounting

Inventory always seemed like a huge undertaking for me, but  learning about it actually became very straightforward and easy to understand.

I First started with the inventory I had on hand.  No matter when I sell my product, the value of my inventory will remain constant based on different methods of inventory accounting.

Those methods are:

Weighted average

First in/First out

Last in/Last out

Weighted average – calculated the total cost of items in inventory that are available for sale divided by the total number of units available for sale.  I always do this calculation at the end of my accounting period.

For example:

Seventy five pairs of shoes @ $20 each  = $1,500

Thirty seven pairs of shoes @ $10 each = $  370

 Total number of shoes  = 112

 Average shoe cost = $1870 / 112 = $16.69

  $16.69 is the average cost for each pair of shoes.                             

 First in/First out – I was confused on this method until an accounting friend of mine explained it.  FIFO is the abbreviation used in the accounting world.  So, first in/ first out means that the first pair of shoes I put into inventory will the first ones sold.  This is based on the principle that most businesses tend to sell the first set of goods that come into inventory.

Example: suppose I purchase five pair of shoes @ $10 a piece on March 17 and purchased another five @ $20 a piece on march 20.  I then sold the first pairs of shoes on March 30.  Using FIFO  method, the five shoes I purchase @ $10 would be sold first.  This left me with the five shoes purchased for $20 and now my inventory value reads $100.

Last in / First out -  This method is referred to as LIFO.  This method is based on the assumption that the most recent units purchased will be the first ones sold.  The advantage of last in/first out accounting is that typically the last shoes purchased were at the highest price and that by considering the highest priced items to be sold first, a business is able to reduce its short-term profit, and hence, taxes.

Example:  suppose I purchased five shoes @ $10 a piece on March 10 and five more @ $20 a piece on March 15.  I then sell five shoes on April 12.  The value of my inventory, using LIFO, would be $50, since the most recent pair of shoes purchased at a total value of $100 on March 10 and were sold on April 12.  I was left with the five pairs of shoes valued at $10 each.

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Posted by nooshin - August 29, 2010 at 1:41 pm

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Inventory – Build Raw Materials to Finished Goods


Simply Accounting Inventory Tutorial

The program I use in my bookkeeping office is Simply Accounting version 2010.  My newest project is a manufacturing coffee company where they buy raw beans and roast to create a finish item.  In the inventory module I have created codes for all the raw materials and finished good items.  I have put a letter “C” in front of each finish good and letter ”Y” in front of each raw material.  This is for reporting purposes.

Inventory and Service Records

Once all the inventory codes are entered start building the item assembly by clicking on the Build tab.

Inventory and Service Records Build

Inventory and Service Records Build

You are now building one 2300g (5lb) package of coffee.  Two raw material itmes are being pulled at 2.5 lbs each to make a total of 5lb package.  There will be one bag and one clear bag used for packaging.  Lets look at the journal entry.

Journal Entry

Notice the finished goods inventory asset account is being debited while the raw goods inventory asset account is being credited.  Now you are ready to sell this item.

Sage Simply Accounting 2010 Pro Financial Management – Complete Product – Standard – 1 User – Retail – PC

For more tutorials on Simply Accounting visit:

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Posted by nooshin - August 6, 2010 at 2:33 pm

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