Tolerating non-payment is simply a part of doing business. To assist in measuring this dollar value, the accountant must estimate bad debts. This is the fifth part in the series of bookkeeping estimates within the advanced skills section of bookkeeping.
Specific Identification Method
A highly accurate inventory management system is the specific identification method. When a business processes model numbers and serial numbers for their inventory, it is best to use this method as it provides the greatest control over the actual assets. If used appropriately, this management tool can increase sales and reduce losses.
Most small businesses use the annual inventory system to determine ending inventory value. Any adjustments are to the income statement inside the cost of goods sold formula. This is acceptable if management only wanted accurate financial statements once a year. But this is unrealistic for a small business.