The Ultimate Guide to Retail Accounting in 2023

Accounting is very important for retail business like any other business. However, retail accounting has a little different approach compared to the accounting for other businesses. There are several different processes and methodology in the working of retail business. So, accounts here can be handled properly only by the Retail Accountants who have experience working in it. In retail business, a proper inventory’s value is estimated instead of manual calculation. The Retail Industry Accounting Practices are a little different which ensures that efficient accountancy is achieved. If you have a retail business then you need to understand that a proper accounting approach is essential here.

Managing of the Inventory Cost

One of the most distinct factors of the retail industry is about its inventory. It is practically impossible to consider inventory as an expense until the sale is done. Here, inventory is considered as an asset which is owned by your business. Here, the inventory purchase is recorded as the cost of goods sold (COGS) or cost of sales (COS), in the profit and loss account. The profitability of the business is extremely impacted by the inventory cost. This has made the inventory valuation method extremely important.

What are the Costing Method Solutions For Retail Business Accounting?

In order to get a proper solution for the costing method for the inventory, you can use any of the three possible methods here.

The four common costing methods used are:

1. First in, first out (FIFO)

In FIFO method, the costing of the first order is considered then the revenue gained is compared with it and that revenue is assigned to the cost of goods sold. This method is a proper solution in the costing method for the inventory.

2. Last in, first out (LIFO)

When you have a Last in, First out (LIFO) system like a bucket, then it makes sense that the most recently put item will be on top and sold first. Here, the first order cost of the goods sold is considered giving proper costing.

3. Weighted average

In some cases, the items which are older and newer get mixed-up and it is difficult to estimate the cost of the exact item sold. So, here we can go with the weighted average order costing method to provide proper costing.

4. Retail method

The retail method is different from the previous types of the method where the costing is based on the retail price. It avoids other complicated aspects like cost matching, physical count, etc. This method can be very implemented for the retail business.

These are some general costing method solutions for the retail business accounting which the Retail Accountants can use.

General Accounting Cycle For Retail Stores:

Recording of all the transactions.

Generating the financial statements.

Reconciliation of all the transactions.

During all the accounting transactions, proper adjustments can be made wherever necessary. So, it is easy to understand that a general accounting cannot work for the retail business, you need a different Retail Accounting approach.

If you find it difficult to get expert Retail Accountants for your business, then you can outsource it to experts. Accounts Junction provides Retail Accounting service for the retail industry business. They have an experts' team which follows appropriate Retail Industry Accounting Practices. Accounts Junction is a popular accounting services providing agency around the world.