This book describes how to record purchases and sales of merchandise inventories for manufacturers, and for wholesalers and retailers. It explains and illustrates each valuation method in detail, providing you, the reader, and a path to follow to value and record inventory-related transactions on your own.
This book is ideal for college accounting and finance students as well as bookkeepers and financial analysts. In writing the book, I assume that the reader understands how to make general journal entries and to prepare financial statements. If you do not understand how to do either (or both) of these functions, I recommend that you read my eBook Everything You Need to Know About Basic Bookkeeping .
Merchandise inventory represents one of the largest asset categories by dollar value on the balance sheets of most manufacturers, wholesalers and retailers. Because the generally accepted accounting principles used in the United States offer so many options regarding valuing and allocating the costs of this asset, it is also one of the categories which pose the greatest challenges to bookkeepers, accountants and financial analysts.
Unfortunately, most textbooks treat accounting as something closer to rocket science than to a common practice performed by millions of businesspeople or their bookkeepers every year. I am writing this book to demystify accounting for these assets and to teach you, the student, its most basic principles and practices.