Accounting: Merchandise Inventory Merchandise Inventory Essay

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To do otherwise would create problems with the company's accounting.

Cosigned goods are also included in the merchandise inventory (Elliot & Elliot, 2004). Even though they are out on consignment, they are still a part of the goods that belong to the company (Elliot & Elliot, 2004). If these goods have not been included in the company's inventory, it becomes difficult to account for their sales and can cause serious problems with accounting. Not including cosigned goods would make it appear as though those goods have already been sold, but there would be no income for them. When they did sell, the income would appear to come from goods that were not shown in inventory. That can take time and effort to sort out, and can leave the company looking as though it was trying to hide something when, in fact, it simply listed its goods incorrectly. By making sure that cosigned goods stay as a part of merchandise inventory, a company can avoid many types of accounting problems.

Damaged goods do not belong in a company's merchandise inventory because they will not be sold (Elliot & Elliot, 2004).

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If they cannot be sold (due to the damage), they have no place in an inventory of the goods the company has for sale. Many companies mistakenly think that they have to include all the goods they receive in their merchandise inventory, but that is not the case. They must include all the goods that they intend to sell, which is not the same thing. Naturally, any company that receives goods for resale does so with the intent to sell them, but if the goods are damaged (and that is not noticed until the company has taken possession of them) there is no reason why the company must put them into its merchandise inventory. It is better to hold the goods out of the inventory so that they can be returned as defective for a refund, a credit, or more goods that are not damaged. Putting them into the merchandise inventory with no intent to sell them would only complicate that process......

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