Tepper04-3

Tepper04-3 - 5 Part III. Shortages and Overages B....

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Unit IV The Retail Method of Inventory
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Part III Shortages and Overages
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©2009 Fairchild Books, A Division of Condé Nast Publications. 3 Part III. Shortages and Overages A. CAUSES OF SHORTAGES AND OVERAGES The common causes of shortages and overages are: 1. Clerical errors in the calculation of the book and/or physical inventory: - Failure to record markdowns properly - Incorrect “retailing” of invoices - Errors in charging invoices to departments - Errors in recording transfers - Errors in recording returns to vendor - Errors in recording the physical inventory
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©2009 Fairchild Books, A Division of Condé Nast Publications. 4 Part III. Shortages and Overages 2. Physical merchandise losses which include: - Theft by customers and/or employees - Unrecorded breakage and spoilage - Sales clerks’ errors in recording sales - Overweighting - Borrowed merchandise - Lost or incorrect price tickets - Sampling
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©2009 Fairchild Books, A Division of Condé Nast Publications.
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Unformatted text preview: 5 Part III. Shortages and Overages B. CALCULATING SHORTAGES AND OVERAGES 1.The Physical Inventory Count as a Determining Factor in the Calculation of Shortages or Overages Concept: Shortage (or Overage) = Closing book inventory at retail (minus) Physical inventory count 2009 Fairchild Books, A Division of Cond Nast Publications. 6 Part III. Shortages and Overages 2. Expressing the Amount of Shortages or Overages for a Period as a Percentage of the Net Sales for the Same Period Concept: Shortage % = $ Shortage $ Net Sales See page 186 2009 Fairchild Books, A Division of Cond Nast Publications. 7 Part III. Shortages and Overages 3. Estimating Dollar Shortages that are Expressed as a Percentage of the Planned Net Sales Figure for Internal Control Purposes Concept: Estimated dollar shortage = Estimated shortage percentage x planned net sales...
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This note was uploaded on 02/14/2012 for the course HUEC 3043 taught by Professor Freeman during the Fall '10 term at LSU.

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Tepper04-3 - 5 Part III. Shortages and Overages B....

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