List and briefly discuss three measures that can be taken to maintain good controls over merchandise inventory.
What will be an ideal response?
Answer: Any three of the following are acceptable:
1. Ensuring merchandise inventory is not purchased without proper authorization, including purchasing only from approved vendors and within acceptable dollar ranges.
2. After inventory is purchased, the order should be tracked and properly documented when received. At time of delivery, a count of inventory received should be completed and each item should be examined for damage.
3. Damaged inventory should be properly recorded and then should either be used, disposed of, or returned to the vendor.
4. A physical count of inventory should be completed at least once a year to track inventory shrinkage due to theft, damage, and errors.
5. When sales are made, the inventory sold should be properly recorded and removed from the inventory count. This will prevent the company from running out of inventory, often called a stockout.
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