K.I.S.S.? Only If It’s Not Too Costly
A Comparison of the Cost vs. Retail Method of Accounting for Inventory
K.I.S.S. – Keep It Simple, Stupid – may aptly describe the manner by which many retailers calculate their all-important Gross Profit. For some, it works just fine. For others, "keeping it simple" can be disastrous!
If you are using the Cost Method of accounting, you are using the more common method of inventory valuation. It is easy to understand and requires only simple records and management of a good point-of-sale inventory system. It’s the K.I.S.S. method...but may be the kiss of death!
The Retail Method is more complex and requires more bookkeeping, but can be superior for controlling the Cost of Goods Sold.