Retail Inventory Method

As we all know an inventory is a detailed record of all the stored goods or items business posses for a certain period of time. Inventory gives the status of costs to all the products or items stored in it. On the other hand retail means selling the products and items to the customers. Hence retail inventory means the inventory that is maintained for selling and its valuation is done according to its retail value. When we present retail inventory as a form of an accounting statement in front of the mangers it actually consists of two columns. One column shows the price at which the goods were purchased and the second column shows the price at which the goods are sold. One column is named as “cost” where the other column is named as “retail”. This explanation can be depicted in the form of a table as under

Particulars Costs Retail
Opening Balance 15,000 20,000
Purchased goods 30,000 50,000
Appreciation None 5,000
Current Balance and available stock 45,000 75,000
Less: Sales   48,000
Less: Depreciation   1,000
Retail Inventory   26,000
Calculated Cost to retail ratio   60 percent
Inventory at cost   26,000 x 60 % =15,600


The above mentioned table shows that the retail price is always compared to the cost price of the stored unit of inventory. The retail price must always be more than the cost price as it has to cover all the other expenses as well such as operation and storage costs. Moreover one thing must be noted down that market circumstances, price and age of a specific inventory unit is also get affected on the retail price of that unit.

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