Overview
The method that you
use for inventory control is important to the health of your business. The
Perpetual Inventory feature automatically provides you with precise,
up-to-the-minute information rather than the periodic averages that are more
commonly available in other systems.
Inventory control addresses several
concerns that help you to maintain full control of costs in your effort to
maintain a healthy business. First there is the value of your current inventory,
both for sales and tax purposes. Then there is the cost of your sales, or Cost
of Goods Sold (COGS). In order to track these costs accurately, you must always
be aware of the real cost of your stock. Many businesses and many computer-based
accounting systems let you track these costs on a periodic basis. With that
method, you must manually transfer numbers from reports into your general
ledger, perhaps once a month. At any point in time, however, you are really
working with averages rather than current figures, and you can only view the
value of your inventory and COGS on a "periodic basis".
MyBooks provides
you with a true, comprehensive, and virtually transparent perpetual inventory
system. This means you always have precise, up-to-the minute information about
your investment and exposure in inventory. It is transparent in that you do not
need to take any special or additional steps in your daily work to ensure the
accuracy of your perpetual inventory system. It is all done for you by the
MyBooks system.
What exactly is Perpetual Inventory?
Perpetual inventory means that the value of inventory and COGS is
immediately updated with each transaction (i.e., purchases and sales), and the
Trial Balance and Financial Statements are reported accurately whenever the
reports are produced.
How does it work?
Inventory is
an asset and is shown in the balance sheet at its cost. As items are sold from
this inventory, their costs are removed from the balance sheet and transferred
into the COGS, which is offset against sales revenue in the income statement.
In a perpetual inventory system, entries in the accounting records
parallel this flow of costs. When merchandise is purchased, its cost (net of
allowable cash discounts) is debited to the asset account Inventory. As the
merchandise is sold, its cost is removed from the Inventory account and debited
to the COGS account.
In reality, for many companies, it is not quite
that simple: There is often a lapse of time between receiving an item into
inventory, and receiving and recording the vendor's invoice for the item. During
that lapse, the cost of the item may change. In fact, the item may even be sold
before its actual cost is known.
What is so special about the
MyBooks perpetual inventory system?
Maintaining a comprehensive
perpetual inventory can be a very complex task, and most perpetual inventory
systems fall short of completing the process without human intervention. MyBooks
uses temporary holding accounts, such as Uninvoiced Receipts, Physical
Discrepancies, and RMA Holdings, to reconcile all the numbers as accurately and
transparently as possible at any given moment, resulting in a very solid
inventory accounting system. You do not need to be concerned with these issues,
so you can focus on your core business. This is a shining example of the
computer system doing the real tough work for you—not just the time-consuming,
tedious, and voluminous work—and delivering on its promise to help you make your
business better and more successful |
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