Accounting Report: Analyzing Inventory Management for Business Growth

This report examines inventory management techniques, specifically focusing on perpetual and periodic inventory systems. It highlights the differences between the two systems, including how they handle cost of goods sold, and the use of computerized inventory management and cycle counting. The report then details the advantages of the perpetual inventory system, such as reduced investment in materials and the ability to formulate proper purchase policies. It also notes how the system helps in identifying and preventing theft. Finally, the report suggests practical steps for implementing a perpetual inventory system, including investment in inventory management and security. The report is supported by a bibliography citing relevant academic sources. This report offers valuable insights into improving business performance through effective inventory management strategies.

Running head: ACCOUNTING
Accounting
Name of the student
Name of the university
Authors note

1
ACCOUNTING
23rd July, 2019
14A Brick Lane, Ashlake, South Australia 5222
South Australia 5222
Miss lace
Chartered accountants
In response to our earlier meeting over proposed expansion of your business I was advised to
Suggest you some explanations over how would you increase the company’s performance.
However my suggestions are listed below.
 Accounts: Under the perpetual system there is a continuous update over the inventory
transactions. While in the accounting period concept the physical periods are used to
derive cost of goods sold.
 Computer systems: Under periodic inventory system there are continuous update over
cost of goods sold and hence computerised inventory managing process is used. On
the other hand for perpetual inventory system is fully manual.
 Cycle counting technique: It is literally impossible to use cycle counting technique
under periodic inventory system. But for perpetual inventory system to obtain
accurate inventory technique cycle counting technique is used.
The main advantages of perpetual inventory systems are as follows-
 Less investment needed in materials: In perpetual inventory system a check and
receipt over the products and facilities are undertaken. Hence it reduces the
investment amount.
 Formulates proper purchase policy: A storekeeper could easily know the quantity of
materials required by the factory outlet. Hence it helps to make purchase policies.
 Leaks and theft: This system helps to find and take actions against possible
theft.Hence miss lace could try to implement all these techniques in the business.
In order to implement perpetual inventory system miss lace need to spend money on-
 Proper inventory management
 Purchase of raw materials
 More security towards leaks and thefts.
Yours sincerely
Mr X

2
ACCOUNTING
Bibliography:
Bragg, S.M., 2013. Inventory management. Colorado: Accounting Tools.
Chołodowicz, E. and Orłowski, P., 2015. A periodic inventory control system with adaptive
reference stock level for long supply delay. Measurement Automation Monitoring, 61.
Chołodowicz, E. and Orłowski, P., 2016. Comparison of a perpetual and PD inventory
control system with Smith Predictor and different shipping delays using bicriterial
optimization and SPEA2. Pomiary Automatyka Robotyka, 20.
Khabbazi, M.R., Hasan, M.K., SHAPI’I, A., Sulaiman, R. and Taei-Zadeh, A., 2013.
Inventory system and functionality evaluation for production logistics. Journal of Theoretical
and Applied Information Technology, 54(3), pp.377-387.
Ngubane, N., Mayekiso, S., Sikota, S., Fitshane, S., Matsoso, M. and Juan-Pierré, B., 2015.
Inventory management systems used by manufacturing small medium and micro enterprises
in Cape Town. Mediterranean Journal of Social Sciences, 6(1), p.382.
Onyekwelu, U. and Ugwuanyi, U.B., 2014. Effects of IFRS adoption on inventory valuation
and financial reporting in Nigeria. European Journal of Business and Management, 6(8),
pp.29-34.
Rozhkova, N.K., 2015. Synthetic and Analytical Accounting Of Inventory as a Tool to
Improve Inventory Accounting System in Vietnam. Journal of Economics, Business and
Management, 3(5), pp.489-492.
Wild, J., 2015. Financial accounting fundamentals. McGraw-Hill Higher Education.