November 22, 2020

Small Business Accounting Software 2021

Small Business Accounting Software 2021 when you're doing inventory accounting properly you gain a number of insights that can both save your business money and increase profits there are a few ways to do it and they don't all involve physically counting every, single item this video covers the different ways to value your, inventory including FIFO LIFO and average cost methods and two different inventory management systems periodic.

And perpetual we're not giving tax advice though and it's always best to speak with a qualified advisor if you. Have specific questions or if you want to change how you manage your inventory of course you want to know how much inventory or stock you have on hand, but the bookends of inventory accounting or what each, item cost you and the price that you sell or sold each item for at its simplest your inventory cost equals the price you paid to purchase it as. Your business grows you may want to include the cost of shipping storing and sharing and any labor costs associated with your inventory, but for now let's just stick with the purchase price also known as the buy price both your buy price and your sell price, are likely to change over time let's say your vendor starts, charging you more or you get a huge supply of product and a. Bulk rate or maybe you decide to sell some outdated items at a discount when your buy and sell prices change so do your profit margins and so does the value of the inventory on your books here are, three different ways to link your buy price in your sell. Price for accounting purposes with the first-in first-out or a FIFO method it's, assumed that you sold the items in the order that you purchased them this doesn't have to happen literally you can sell them in, any order you like unless you're selling perishable items from an accounting perspective, you imagine that everything happens in sequence when a new item comes in you note what it costs and place it in line to be sold even if that line is only, imaginary when you sell one of those items. You record the sale price as if you had sold the first item and repeat for each item in the sequence in the US there's also the last in first, out or LIFO method which makes the opposite assumption you account for all items as if you sold the ones that, have just come in before the ones that were already on the shelf or in the. Storeroom and then there's the weighted average cost method.

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