Scenario Analysis No. 10 – How to manage inventory for a fashion boutique using an online business system?

A question was asked on how a business system can track the transactions related to stock quantity and stock balance for items on sale in a fashion boutique business.

There are three major areas to consider when tackling this issue. The areas are inventory set-up, point-of-sales, and month-end closing. The explanation for each of the areas are described below.

Inventory Set-up

The costs coming into the business related to the items for sale must be recognised and recorded. These costs would be the clothes and labour used in making the items.

The clothes supplier would invoice the business for the clothes and the tailor for making the items. These represent the raw materials costs.

An invoice received from supplier shall be processed accordingly. The accounting entries are as follows:

DR    Inventory – Material and Labour Costs     CR    Supplier – Material and Labour

An illustration of the entries are as follows:


The items would be delivered to the business in the sets and quantity ordered.

If the sets are “new” items and in numerous varieties, an excel spreadsheet list of the items is prepared with id codes for each of them. The details of the list (except quantity) are uploaded into the business system from the spreadsheet. An illustration is as follows:


The selling price of each item is as determined by the business. Unless known, the cost price of each item is entered as zero.

The quantity received from the supplier is then entered into the system for each id codes. This “InventoryIn” shall trigger entries for accounting as follows:

DR    Inventory – Items                 CR    Inventory – Materials and Labour

The items in the system are ready for sale.


A Point-of-Sales (POS) counter is set-up in the system. An example is as follows:


As sales transaction happen, the respective items are selected and the sales quantity accumulated.

Upon check-out, cash is received and receipt issued. The “InventoryOut” will also be triggered, together with “Receipt” for the following accounting entries:

DR    Sales Expense – Items               CR    Inventory – Items

DR    Cash – POS                                    CR    Sales – Items

A specialised printer may need to be attached to facilitate hardcopy receipt printing.



At month-end, any remaining balance in “Inventory – Material and Labour Costs” is closed-off to “Sales Expense – Items”. The accounting entries as follows:

DR    Sales Expense – Items           CR    Inventory – Material and Labour Costs

A monthly inventory check should be performed to determine the balance shown in the system is the same as the physical balance.

Note: the matching of Sales and Cost of Sales may differ from the normal accounting treatment especially when there is difficulty to track the cost of each item available for sales.

The last #1SME1Sistem seminar for 2016 on “Grow your business by better financial management and accounting for SMEs” shall be held on 8th December 2016. Kindly contact us via GNZ website to register your interest and reserve your seat. **




1 thought on “Scenario Analysis No. 10 – How to manage inventory for a fashion boutique using an online business system?

  1. I really liked your article .Great


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