Inventory issue

[kllow]

I order some inventories for my new company. However, I do not have the physical inventories before I give instruction to supplier for ensure the freshness of inventories and he will deliver his latest goods as per contract. Therefore, I only know the quantity of inventories but I am not keeping any physical inventories.

My questions as below:
1. What is the best inventory method - perpetual or periodic?
2. What is the journal entries?
3. How can I record in income statement?

Someone told me that periodic method debit purchases credit account payables? I am worry that income statement will have cost of goods sold but no sales incur for few months.

Thanks in advance.

 

[smallbushelp]

The periodic and perpetual inventory systems are different ways to track the quantity of goods that you have on hand at your business. If you're not keeping any physical inventory, then why do you need an inventory system at all? You have nothing to keep track of.

Please let me know if I have misinterpreted your scenario.

 

[kllow]

Thanks for the reply.

Any idea where shall I record in book when supplier send me the invoice and inventory? I need to pay full amount first and he will send certain amount of inventory separately follow instruction.

Invoice received:
Dr ??
Cr Account Payables

Inventory received:
Dr inventory
Cr ??

 

[smallbushelp]

Well for me, since I am paying for the inventory in advance, I would create an asset account called Prepaid Inventory or maybe Inventory Receivable and debit that account when I credited accounts payable upon receipt of the invoice. Then when the inventory is actually received, I would debit an inventory asset account and credit the previously mentioned Prepaid Inventory or Inventory Receivable account. I'm not sure how that fits in with the accounting principles in your country but here in the United States, that would be acceptable.

 

[kllow]

Thanks for you help.

Have a nice day.