Popular ways in which you can manage your inventory include:
-Last in first out
-First in first out
The “last in first out” approach provides that the most recent items to enter the inventory are the first to be sold. The inventory, at the end of the company’s fiscal year, will consist of goods acquired before the last inventory.
The “first in first out” approach is defined as selling the goods that have been brought in, in the order in which you recieved them. The inventory, at the end of the company’s fiscal year, will consist of goods most recently acquired.
The “weighted average” approach for a company’s fiscal year follows these equations:
Weighted average cost per unit=(cost of the goods available for sale)/(number of units available for sale)
Purchasing order does not matter in this method, because at the end of the year the costs of the goods are averaged. Thus,
Cost of Goods Sold=(weighted average cost per unit) X (number of goods sold)
Keeping an accurate tabulation of inventory can be very difficult. Luckily, CLG Professional Services offers Small Business Services to help small business owners keep an accurate account of inventory as well as other bookkeeping necessities so there is no hassle come tax-time.
Go to CLG Professional Services to have your tax needs taken care of.