Choosing the right method of inventory accounting not only help the business to ensure the financial transparency but also improve operational efficiency. However, not every enterprise is to understand the above methods. This article Accnet will provide detailed information on the accounting method, inventory, help businesses choose the method that best fits the business model of his.
1. Introduction to methods of inventory accounting
Method of inventory accounting is the way business is recorded valuation transactions related to goods imported, exported, inventory. These methods help determine the correct inventory value, end of period, cost of goods sold, profit business.
The importance of choosing the right method:
- Decide how to determine the value of inventory, cost of goods sold affect profits.
- Businesses can reduce costs of storage, improving cash flow using the method of proper accounting.
- To help businesses accurately grasp the situation of goods in warehouse, given the timely decision on import/export of goods.
2. The method of inventory accounting downloads
Here are the popular methods:
2.1. Method weighted Average
How to calculate: Unit price average = (Total value of inventory the beginning of the period + Total value of income in the period) / (Total amount of inventory the beginning of the period + Total number of rows entered in the states).
- Characteristics: value inventory, cost of goods sold is calculated based on the average price of the shipment in the states.
- Pros: simple, easy to apply. Reduce fluctuation in prices during the period.
- Cons: do Not accurately reflect the current value of inventory when the price fluctuations.
2.2. Method of inventory accounting first in - first out (FIFO - First In, First Out)
Distance calculator: inventory value, end of period = Total value of the shipment, not from batch to enter the final.
- Characteristics: goods entered into before being output before the inventory, end of period is the shipment enter after the same.
- Pros: Reflect inventory value close to the current market price. In accordance with the business are perishable goods, or have short-term use.
- Cons: Not properly reflect the actual cost in the states if price volatility.
2.3. Method of inventory accounting Entry after - prerendered, (LIFO - Last In, First Out)
Distance calculator: inventory value, end of period = Total value of the shipment, not from batch to enter first.
- Characteristics: goods enter the following are output before the inventory, end of period is the shipment to enter first.
- Pros: Reflects the cost price of the capital close to the market price when the price fluctuates. Reduce the corporate income tax in terms of inflation.
- Cons: Not accepted in many accounting standards international (such as IFRS). Inventory value at maturity may not reflect the true market value.
2.4. Method of inventory accounting Purpose the
Distance calculator: export warehouse or inventory end of period is calculated based on the value of each specific item.
- Characteristics: inventory value is calculated separately for each item, based on the actual value of them.
- Pros: accurately Reflect the value of inventory, the price of capital. In accordance with goods of great value or recognizable (such as cars, jewelry, high-tech equipment).
- Cons: Complicated, expensive in the management. No matching goods have bulk value.
2.5. Method, the lowest value (Lower of Cost or Market - LCM)
Distance calculator: compare the original price (purchase price/price production) and net worth can be realized (selling price minus the cost of finishing, sales). Recorded at the lower value.
- Characteristics of accounting methods this inventory: inventory is recorded at the lower value between the original price and the market value.
- Pros: faithfully Reflect inventory value in case the market price decreases.
- Cons: can cause a decrease in property value, profit if the market price is lower than the original price.
2.6. Methods of inventory periodically
Distance calculator: inventory, end of period = inventory the beginning of the period + enter in - Goods in the states.
- Characteristics: Only calculate the inventory value at the end of the accounting period.
- Advantages: simple, low cost inventory management regularly.
- Disadvantages of the method of inventory accounting this: do Not fit with the business of commodity fluctuations. Lack of timely information about inventory value during the period.
2.7. Method of inventory accounting of
Calculation: value inventory and cost of goods sold are updated continuously after each transaction.
- Characteristics: Recorded in detail each transaction import and export inventory during the accounting period.
- Advantages: Provides accurate information in a timely manner. Business suits have large cargo, need tight control.
- Cons: Complicated, expensive in the management.
3. The factors that affect the choice of method of inventory accounting
3.1. Particular industry, product
- Manufacturing enterprise: Usually use the method of weighted average to calculate the price of raw materials, finished products.
- Commercial enterprise: the Priority FIFO method to ensure the rationality of the track, calculate goods rotated fast.
Practical example:
- Food industry, beverage applied FIFO to manage goods have limited use short.
- Heavy industries such as automobile applied methods aim to control each shipment of high value.
3.2. Price fluctuations in the market affect the method of inventory accounting
- In the inflationary environment: FIFO Method often do not properly reflect the current costs, leading to the inventory valuation lower than actual.
- In the environment of price stability: the Method of weighted average yield more accurate results when the inventory value is less affected by market fluctuations.
3.3. Legal regulations
Accounting standards in Vietnam (VAS):
- Allowed to use methods such as FIFO, weighted average, the destination list.
- Method LIFO not be applied according to VAS.
Standards, international accounting (IFRS): Similar VAS not accept LIFO due to negative influence on the accuracy of financial statements.
- Technology/management system
- Application software: accounting software integrated modern features support many methods of inventory accounting, helping business easily customized according to the needs.
- Data integration: synchronization with ERP system to ensure accurate, comprehensive, in inventory management.
4. Technology solutions and support to apply the accounting method of inventory
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Feature highlights:
- Supports all methods of inventory accounting
- Friendly interface, easy to use, help bookkeeper easy to manipulate.
- Real-time reporting, support quick decision making.
Advantages:
- Remove flaws commonly encountered in the process of the accounting craft.
- Optimize resources thanks to automate the process of data entry, calculation, reporting.
- Our team of technical support, rich experience, always ready to respond, handle any problem.
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PHẦN MỀM ACCNET KHO
Phần mềm Accnet Kho a comprehensive solution, business support, inventory control closely, improved performance, enhanced competitiveness.
Benefits highlights:
- Track quantity, condition, value of goods in real time.
- Process input – output – inventory automatically, limiting errors, accurate data.
- Increased processing speed, support lookup the fast, accurate.
- Provide reports, intuitive, easy to understand, decision support fast.
- Smooth connection with the ERP system, accounting, sales.
Phần mềm Accnet Kho – the perfect solution to help businesses optimize operation, save time and cost. Experience software today!
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Lựa chọn và triển khai đúng phương pháp kế toán hàng tồn kho là yếu tố cốt lõi. Các phương pháp như FIFO, bình quân gia quyền, hay đích danh đều có những ưu điểm riêng, việc chọn phương pháp phù hợp phụ thuộc vào đặc thù sản phẩm, nhu cầu của doanh nghiệp. Với giải pháp phần mềm Accnet Kho từ Lạc Việt, doanh nghiệp sẽ có được sự hỗ trợ tối ưu để quản lý hàng tồn kho hiệu quả.
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