Retail Method of Inventory

It is important for every business to carry inventory. This will enable it to ensure that it does not run out of raw materials for manufacturing and finished goods to sell. When they hold inventories, they must be able to account for the tax inventory, accounting and the internal financial purposes. The retail method is a valuing method that maintains a detailed record of all purchases made and goods on hand at purchase price and retail price or at the price which the good is sold. It has numerous advantages including the following.

To begin with , the retail method produces solid inventory control records. It ties the direct products to the sales made and provides an ending count without too much additional work.  It also deals directly with items and not groupings of items. In reconciling the number of units at hand against that of the number of goods purchased, one I able to know how many units were sold. This will come in handy as details on items not accounted for in the sales records can be identified. In addition to this, the retail method of inventory makes it easy for a business owner to establish if there is any shortage of products or goods stolen.

The method is also cost effective and very simple. It is relatively fast and makes it easy to determine the merchandize sold and those still in stock. Thus,it is majorly used by major retailers. Moreover, the inventory is usually updated automatically every time the register records sales of an item. This is better than the periodic inventory method that is not real time.