Methods for Managing Inventory Accounts - Recording of Goods Purchases

Two different methods for managing inventory accounts are available. This article explains in detail the two methods on how merchandise purchases can be recorded.

The merchandise purchases of a company can be recorded in two different ways:

• Recording of merchandise purchases as an increase in inventory (see following blog posts)
• Recording of purchases as merchandise expense (see following blog posts)

Method 1 is the correct accounting variant and is increasingly used by more young entrepreneurs due to the increasing business transactions over computer systems. However, the drawback of recording merchandise purchases as an increase in inventory is that the number of postings is much higher than with Method 2. For this reason, many smaller companies without accounting software choose Method 2 to reduce the workload.