Copyright 2020 - Pfeiffers Accounting & Consulting LLC

If you are a company that sells merchandise or goods, your accounting system is more complex and requires more specialized accounting methods to keep your inventory accounting accurate. 

 Normally, in a company that has inventory, there will be these different accounts and source documents required to keep your inventory accurately recorded.


Inventory account (for recording all goods received)

Inventory purchases receiving account (for prepaying for goods not yet manufactured)

Accounts Payable account (for recording invoices for inventory coming in)

Source Documents:

Purchase orders: (for ordering goods by vendor on specific orders, this is non-posting until goods come in)

Acknowledgment: (A document showing all items on purchase order with quantities costs, and total dollar amounts)

Packing list: ( A document showing what items and quantites of those items were received on an order, usually without cost)

Some ways to minimize variances on the inventory you are receiving and selling:

1. Check your boxes of goods (open them up) to make sure items relevant to their item number is in the box.

2. Check packing list and acknowledgment to the purchase order and invoice. Make sure all items match in quantities and costs received.

3. For open sales orders, receive goods correctly for what customer is ordering, and for reserved orders, receive goods by date when order is closed and sent to customer. This maintains the structure of inventory of how quantities are deducted.

4. Count inventory monthly

5. When there are variances, make an adjustment to your inventory and cost of goods sold accounts for the goods to reconcile it to the inventory valuations.

Managing ordering:

Inventory should be grouped into types, this makes it easier to review on reports and will help you know what items are sold more often and when to reorder them.

Seasonal factors: Take into consideration the buying patterns of customers. This helps you gauge when you should or should not be purchasing certain goods.

Copyright Jeanine Pfeiffer

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