Why is an accurate value of ending inventory and cost of goods sold important?
Inventory valuation is the fiscal amount linked with the items in the catalogue at the end of an accounting duration. The valuation is founded on the costs sustained to obtain the inventory and preparing it for retail. Inventories are considered as the principal present-day business assets. According to Warren and Jones (2019), Inventory valuation allows an individual to assess the rate of the products retailed and, eventually, the firm’s profit margin. Warren and Jones (2019) indicate that “accurate value of ending inventory is significant since the described amount of inventory will have an effect on the described sum of inventory.
In this case, this will have an effect on the gross income, and net revenue on the revenue statement, and also the amount of existing assets, working capital, full assets, and shareholders’ or proprietor’s equity stated on the balance sheet. During the duration of growing cost, LIFO equals more recent costs contrary to sales, since this system equals the current costs with existing incomes. Therefore, this is viewed as a conciliation between LIFO and FIFO to decide the price of goods retailed and the ending inventory. Moreover, the cost of goods retailed is significant as the price of products retailed is regarded as a measure of the cost sustained by an enterprise to obtain or generate the products it retails.
Have you ever participated in an inventory count for a retail business or observed one been done? If so, please describe the process.
In my case, I have certainly not taken part in an inventory count for selling enterprise or witnessed one being conducted. Nonetheless, a member of the family worked for a firm few years back that completed an inventory for numerous stores. For instance, Sears, Best Buy, amongst others. His accounting report was after the establishment has accomplished a graphic catalogue to evaluate loss-prevention, every product is added up and exhibited on a printout. He also counted the spoiled and reimbursed products, then reconciled the hand count with a printout of the actual stocked items.