Accounting / July 19, 2018 / Khloe Santiago
This means that you divide net sales, from the income statement, from the inventory figure on the balance sheet and you get a number that is a number of times. That number signifies the number of times inventory is sold and restocked each year. If the number is high, you may be in danger of stockouts. If it is low, watch out for obsolete inventory.
In order to fully comprehend the concept of sales and receipts, you must have a knowledge of accrual accounting. With accrual accounting, sales are posted to the business' books when the merchandise or service is delivered and the customer invoiced. This is completely independent of when the customer pays the bill. Accrual accounting allows for more accurate financial statements, because the expenses and income are more closely matched to when they actually occurred.
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