Generally, companies that sell items in high quantity but low quality such as discount retail stores will favor the periodic inventory system method. On the other hand, companies that sell high priced and high quality but low quantity items such as jewelry stores will tend to use the perpetual inventory system. The main transaction of a merchandising business comes from buying and selling.
Merchandising business uses assets, merchandise inventory, and accounts receivable.
A merchandising business is extremely prone to theft and fraud.
That is why it is critical for a merchandising business to take precautions to protect their assets which is commonly referred to as internal controls.
To maintain control of the merchandise inventory, it is required to take a physical inventory.
This is the physical count of the merchandise that is currently available.
So, accuracy is very crucial during this process.
The merchandise inventory is all the goods that will be sold in the future.
The ending inventory is the goods that cannot be sold or are not intended to be sold.
The count for the business is usually taken at the end of the fiscal year or when the business will significantly slow down such as January or February.
It is very common for companies to experience loss of merchandise from their own employees.
When using the periodic inventory system there is no way of finding out how this happened because the loss of merchandise is automatically included in the cost of goods sold.
However, with the perpetual inventory system, it is a lot easier to identify losses because the merchandise inventory account is constantly updated with sales and returns of goods.
Once the amount of loss is calculated, the merchandise inventory account will be updated.
Walgreens is a nationwide store chain and has over 3,000 stores and pharmacies.
It is a retail store phenomenon and has over 27 years of record crumbling sales.
Customers like their high-class customer service, huge selection, and quality products.
Companies with a financial interest in Walgreens look at the past success of the company and evaluate its financial management.
The companies that are interested will be seen in the Financial Highlights from the company’s annual report.
Net sales, total assets, net earnings, and stockholder’s equity are all terms that are used to measure the financial stake of the company.
Walgreens managers must be skilled in accounting to help maintain the financial stake of the company.
However, Walgreens managers are not the only ones that need to be skilled in accounting.
The people who have some type of financial stake in the business such as owners, investors, attorneys, employees, and creditors must also be skilled in accounting so they can analyze the financial achievement of the company.
Anyone who is interested in any one of these roles will require some knowledge in accounting and processes.
Contemporary accountants focus on the needs of decisions in accounting information, whether these decisions are internal or external to the business.
Accounting can be defined as a system that measures, process, and produce financial information about an economic matter such as a business or a government organization.
Accounting serves as a connection between business activities because it records information.
First, accounting analyzes business activity by recording data for them that they can use in the future.
Second, the data is not used until it is needed and retrieved when the time is appropriate.
Last, the information is analyzed and communicated through reports to the decision makers.
One might assume that the data about business activities are the input and the information for decision makers are the output.
A business is an economic entity that sells goods or services to customers at prices that will provide a return to its owners.
