Why Would a Merchandising Company Need Good Internal Controls Related

question 133

Essay

Why would a merchandising company need good internal controls related to its inventory? List three of the key elements of an internal control system that would apply to inventory, and explain how each of them relates to inventory.

---

Definitions:

Ending Inventory

Represents the value of goods available for sale at the close of an accounting period, calculated by adding purchases to beginning inventory and subtracting cost of goods sold.

Accounts Payable

Financial obligations or debts that a company owes to its suppliers or creditors for goods and services received but not yet paid for.

Owners' Equity

Represents the residual interest in the assets of an entity after deducting liabilities, often referred to as shareholder equity.

Ending Inventory

Represents the final stock of goods available for sale by a firm at the close of an accounting period.