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Determining the Quantity of Merchandise Inventory

Chapter 19 Lesson 1 Outline
by

TSAR EH ENGL2100

on 14 May 2010

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Transcript of Determining the Quantity of Merchandise Inventory

Merchandise inventory is typically the largest asset of a merchandising business. merchandise inventory is recorded on the balance sheet and the income statement. The Most Efficient Quantity of Inventory A business makes frequent analysis of purchases/sales & inventory records to determine this. A merchandise inventory that is larger or smaller than needed may decrease the net income of a business. Methods used to Determine the Quantity of Merchandise Inventory In order to calculate the cost of merchandise sold, the amount of items in inventory must be calculated each fiscal period. Why Merchandise Inventory is Important Periodic inventory and perpetual inventory are two methods used to calculate the amount of merchandise on hand. When ordering merchandise it is good to be aware of ideal quantities Inventory Record Taking inventory is when employees count, weigh, and/or measure merchandise on hand for a periodic inventory. An inventory record is a form used during a periodic inventory to record information about each item of merchandise on hand. An inventory has space to record Stock # Description # of units on hand total cost of each item Larger than Needed: Smaller than Needed: Excess inventory requires that a business spend money for expensive store space uses capital that could be invested in other assets to make a profit requires that a business spend money for expenses which increase the cost of merchandise inventory Excess inventory may become obsolete or unsalable Sales may be lost to competitors if- items wanted by customers are not on hand there is an insufficient variety of merchandise to satisfy customers DETERMINING THE QUANTITY OF MERCHANDISE INVENTORY
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