In short

Retail bookkeeping is built on the daily POS summary. Gross sales, discounts, returns, sales tax collected and gift card activity are recorded separately, card batches and cash deposits are matched to the bank, and cash over and short is tracked. Vendor invoices, freight and credits are reconciled into inventory, and cost of goods sold is adjusted to counts or POS valuation so gross margin by category is reliable.

Recording a day's sales

From the POS end-of-day report we post:

  1. Gross sales, by department if your POS supports it
  2. Discounts and returns as contra-revenue
  3. Sales tax collected to a liability
  4. Gift cards sold to a liability, and redemptions against it
  5. Tenders: card batches to a clearing account, cash to deposits

Card batches then clear against bank deposits net of fees, and cash deposits are compared with the drawer count.

Cash over and short

Small differences between the drawer and the POS are normal; patterns are not. We track over and short by day so unusual losses are visible quickly.

Vendor invoices and credits

Merchandise invoices, freight, damaged-goods credits and co-op allowances are reconciled to vendor statements each month. Missed credits are a common leak in retail.

Inventory adjustments

When you count stock, we adjust inventory to the count and record the difference as shrink, so cost of goods sold and shrink are reported separately.

Monthly outputs

A profit and loss with gross margin by department, a balance sheet showing inventory, gift card liability and sales tax payable, and a cash over and short summary.

Key terms

Definitions for terms used on this page:

  • Debits and Credits: Debits and credits are the two sides of every bookkeeping entry; each account type increases on one side and decreases on the other.
  • Cost of Goods Sold: Cost of goods sold is the direct cost of the products a business sold during a period.
  • Balance Sheet: A balance sheet shows what a business owns, what it owes and the owners' equity at a specific date.

Retail Stores problems this addresses

  • Daily POS totals must be matched to card batches and cash deposits
  • Inventory is the largest asset and shrink is hard to see
  • Sales tax collected must be kept out of revenue
  • Seasonal buying ties up cash months before the selling season
  • Discounts, returns and gift cards distort reported sales