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Unit IV - UnitIV (atretail)ofthe

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The Retail Method of Inventory Unit IV
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Retail Method of Inventory The retail system of merchandise accounting permits  the retailer to determine the value (at retail) of the  stock-on-hand at frequent and periodic intervals  without taking constant physical count. The retail method of inventory requires maintaining  a book inventory at retail, as well as other records  that permit the calculation of the cost of total  merchandise handled during the period.
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Retail Method of Inventory To control stocks and determine the profitability of  individual departments, the retail method of  accounting is applied separately to each department. The retail method of inventory valuation involves: Taking a physical inventory count to determine the total retail value  of a particular department Determining the cumulative markup percentage on the total  merchandise handled Deriving the cost value of the closing inventory from the retail by  using cumulative markup percentage achieved on the total  merchandise handled
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Key Terms Book Inventory  is a “statistical record” or book figure  of the amount of merchandise that  should  be on hand  at current retail.  Physical Inventory  is a count taken at the current  retail price of goods owned. It is a count that is  actually done “by hand”.
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Finding Opening Book Inventory When the “retail method” is first installed, a  complete  physical inventory  of all products must  be done. The retail value of the goods counted is used as  the  opening book inventory . This is the same figure as the  closing physical  stock  figure of the previous accounting period or  the original  physical inventory  if it is the first  accounting period ever.
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